Humbert DRABBE

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State Aid ModernisationCompatibility
assessment andrevision of State aid guidelines

• Humbert DRABBE
• Director
• Directorate H
• DG Competition

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1. Scope of the review
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Two key proposals

• Identification and definition of key assessment
  criteria
• Horizontal approach to ensure a consistent
  approach
• Building on existing best practices (e.g.
  broadband)
• Revision and streamlining of State aid
  guidelines, to make them consistent with these
  criteria
• 1st stage Regional aid, RDI, Environmental
  aid, Risk capital, Broadband (aviation, RR)
• 2nd stage other guidelines to be progressively
  aligned

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Scope of future compatibility assessment

• An assessment which first ensures that certain
  key criteria are met
• Incentive effect, market failure, aid limited to
  the minimum
• Speedier treatment of well-designed measure,
  otherwise, more thorough analysis
• Extended scope of the GBER
• A substantive analysis of aid measures so as to
  focus the enforcement on potentially distortive
  aid, including schemes

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Possible review of guidelines' scopes

• So as to increase the predictability of the
  assessment process and bring them in line with EU
  2020 for instance
• Risk capital possible extension to debt finance
  (combined with equity or alone), and to
  established innovative and growth-oriented SMEs
• Environmental aid coverage of energy
  infrastructures?
• RDI better coverage of demonstration projects
  and RD infrastructure
• Broadband ultra-fast networks (even in urban
  areas)

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2. Key assessment criteria for the analysis of
compatibility
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Key assessment criteria
Contributing to common EU objectives and correcting proven market failures State aid should correct the inefficiencies which prevent the market from reaching the objective or address inequalities Risk capital Better targeting SME access to finance failure by defining presumed financing gaps specific to each development stage RDI presumption of absence of market failure in cases where a notified project replicates what the market already offers RR identify the economic and social damages which could be caused in the absence of aid (value added of the aid)
Ensuring an incentive effect Avoid granting aid to activities undertaken in any case Check of counterfactual situation Risk capital tailoring a public-private investment ratio to each development stage (less private participation in more risky seed stages and more private participation in expansion/growth stages)
Limiting the aid to what is necessary Reducing the cost of State aid / By doing so, leveraging private capital Regional aid covering the costs linked to an investment in the region RR "burden sharing" requirements Risk capital limiting aid to the minimum necessary to attract private capital, not exceeding a fair rate of return
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Key assessment criteria
Defining the appropriate instruments The State aid measure should be an appropriate instrument, either by comparison to non-aid instruments or among several aid instruments Environmental aid ensuring that the State Aid instrument does not undermine regulatory measures and market mechanisms RDI e.g. reimbursable instrument in case of a liquidity issue at company level grant instrument where risk/reward profile discourage an investment
Preventing distortions in the internal market By protecting competition, combating protectionism and preventing subsidy races, State aid control should ensure a well-functioning internal market, and helps preventing the worsening of discrepancies between Member States Possibility to define a "black list" of types of aid going against Treaty provisions Regional aid aid for large projects only in "a" regions (in order to avoid subsidy races), more attention to market power / overcapacity issues RDI e.g. requiring open access and wider dissemination where relevant, in order to alleviate market distortions
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3. Revision of the guidelines first
orientations
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Risk capital guidelines

• Possible extension to debt finance (combined with
  equity or alone), and to established innovative
  and growth-oriented SMEs
• Better targeting SME access to finance failure by
  defining presumed equity gaps specific to each
  development stage (market gaps defined per
  debt/equity finance and per development stage)
• Ensuring an incentive effect by tailoring a
  public-private investment ratio to each
  development stage (less private participation in
  more risky seed stages and more private
  participation in expansion or growth stages)

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RDI guidelines

• Better coverage of demonstration projects and RD
  infrastructure
• Promote well-designed schemes with high returns
  for RD
• Redirecting RD towards the areas most in need of
  public investment (prevent crowding out private
  investments and disruption of market incentives
  to innovate)
• Better targeting of the instrument (e.g.
  repayable advances for projects close to the
  market and for liquidity needs)
• Open access to promote dissemination of knowledge
  and prevent undue market power

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Regional aid guidelines

• Better targeting of aid via new maps
• Demonstration that aided project is part of a
  coherent regional development strategy
• Substantive assessment of all large investment
  projects
• Verification of the incentive effect and
  limitation of the aid to the actual needs
• Focus aid for large projects towards the least
  developed areas ("a" regions)
• Possible identification of structural
  overcapacities

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Environmental aid guidelines

• Possible extension of the scope of the EAG to
  better reflect the EU 2020 objectives (energy
  infrastructures, all low carbon sources of
  energy).
• Ensuring that the State Aid does not undermine
  regulatory measures and market mechanisms
  (evaluation of alternative/complementary
  instruments supply obligations for biofuels)
• Review the need for full compensation of
  operating costs (e.g. review need for sheltering
  renewable energy schemes from market evolution)
• Better ex-ante guidance on the cost calculation
  for a simpler assessment

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Broadband guidelines

• Align the Guidelines with the EU 2020 digital
  agenda targets allow aid for ultra-fast networks
  (even in urban areas) under strong
  pro-competitive conditions
• Introduce the concept of "step change" to avoid
  crowding out of private investment and to support
  technologies adequate for low density areas
• Increased transparency requirements
• Clarification, simplification, ease of
  administrative burden

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4. Conclusion
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A key pillar of State aid modernisation

• 1. through the design of measures, ensure that
  the aid is spent efficiently, and that
  distortions of competition remain limited
• Better scoping of guidelines to reflect EU2020
• Focus on efficiency of the aid (e.g. limited to
  the minumum, leveraging private capital)
• 2. consolidate the approach, focus the
  enforcement on main distortive aspects of State
  aid
• Coherent approach applicable to all categories of
  aid
• Prevention of most distortive aid through filters
  and through reinforced analysis of negative
  effects
• 3. provide guidance clearer rules for national
  administrations and aid granting authorities
• Guidance on upfront criteria, and on what needs
  to be demonstrated