Transition to a Net-Zero Economy

Transition to a Net-Zero Economy - Untitled design 25


Although the TCTF requires notification of aid measures, it seems to be more user-friendly than State aid guidelines. This is because Member States may simply copy its provisions in their local law or administrative instrument and sent it to the Commission. A case in point is a German scheme that is reviewed in this article. It was notified to the Commission on 19 June 2023 and was approved precisely a month later on 19 July 2023. There is no indication of pre-notification contacts in the text of the Commission decision.

The purpose of the German scheme that was approved by Commission decision SA.108068 was to support the transition to a net-zero economy.1 The Commission authorised it on the basis of the Temporary Crisis and Transition Framework [TCTF]. The scheme would fund private investments in specific strategic goods needed for that transition. The impact of Russia’s invasion of Ukraine has heightened the urgency to move the German economy away from its dependency on oil and gas and especially Russian fossil fuels.

As explained in the decision, “(4) the Union does not have sufficient industrial production capacity to meet the rapidly growing demand for technologies necessary for the transition towards a net-zero economy (“transformation technologies”), especially from domestic production. For example, there are major dependencies in the photovoltaic (“PV”) industry, where almost 90 % of PV cells are produced in Asia. The battery and wind power value chains are also highly dependent on and economically vulnerable to third countries. […], as acknowledged by the Commission [in the TCTF], “batteries, windmills, heatpumps, solar, electrolysers, carbon capture and storage technologies” are products that are “key to meet the Commission’s climate neutrality goals”. Thus, with the measure Germany intends to create the necessary ecosystem for accelerated investments into the value chain for the production of such products.”

Form of aid

The scheme would grant aid in four different forms:

1. Direct grants.

2. Tax advantages.

3. Subsidised interest rates on new loans.

4. Guarantees on new loans.

Budget and duration of the scheme

The estimated budget was about EUR 3 billion. Co-financing by the European Structural and Investment Funds [ESIF] was not excluded. The scheme would be in force until 31 December 2025.

Eligible beneficiaries and sectors

Both SMEs and large enterprises in certain sectors would be eligible to receive aid. The eligible sectors were those defined in point 85 of the TCTF, as follows:

1. Production of equipment needed for the transition to a net-zero economy; i.e. batteries, solar panels, wind turbines, heat-pumps, electrolysers, and equipment for carbon capture usage and storage.

2. Production of key components designed and primarily used as direct input for the production of the equipment defined above.

3. Production or recovery of related critical raw material necessary for the production of the equipment and key components defined above.

In compliance with the TCTF, the scheme excluded any undertaking or person that was subject to EU sanctions.

The scheme also defined a number of additional limitations and exclusion, as follows: “(19) Only tangible and intangible assets required for the production or recovery of the goods listed in recital (12) may be eligible under the measure. Intangible assets must: 1) remain associated with the area concerned and must not be transferred to other areas; 2) be used primarily in the relevant production facility receiving the aid; 3) be amortisable; 4) be purchased under market conditions from third parties unrelated to the buyer; 5) be included in the assets of the undertaking that receives the aid; and 6) remain associated with the project for which the aid is awarded for at least five years (or three years for SMEs).”

Aid intensity

In line with the requirements of the TCTF, “(21) the aid intensity may not exceed 15% of the eligible costs and the total aid amount cannot exceed EUR 150 million, in nominal value, per undertaking in Germany. However: (a) […] for investments in assisted areas designed in the regional aid map 2022-2027 for Germany in accordance with Article 107(3), point (c), TFEU (“c” areas), the aid intensity may be increased to 20% of the eligible costs and the total aid amount may not exceed EUR 200 million, in nominal value, per undertaking in Germany; (b) […] where the aid is granted in the form of tax advantages, loans or guarantees, the aid intensities may be increased by 5 percentages points. In addition, for investments made by small enterprises, the aid intensities may be increased by further 20 percentage points and, for investments made by medium-sized enterprises, by 10 percentage points.”

Compliance with relevant provisions of EU law

As is now its standard practice, the Commission requested Germany to “(27) confirm that the proposed measure does not by itself, or by the conditions attached to it or by its financing method constitute a non-severable violation of Union law.”

Moreover, Germany committed to make public any individual awards exceeding EUR 100,000.

Compatibility with the internal market

The Commission assessed the compatibility of the aid on the basis of the provisions of the TCTF and in particular section 2.8.

Since the German scheme basically copied the provisions of point 85 of the TCTF, the Commission simply listed them in its decision and noted its approval. The scheme also complied with point 51 of the TCTF, which prohibits relocation of the aided activity within the EEA, and point 52 that requires exclusion of persons or undertakings under EU sanctions. In addition, Germany committed to conform with the relevant rules of the ESIF.

Therefore, the Commission authorised the notified scheme.


The full text of the Commission decision can be accessed at:



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He is professor at the University of Maastricht and the University of Nicosia. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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