On 23 March 2022, the European Commission adopted a Temporary Crisis Framework for State Aid measures (TCF) to enable EU Member States to support businesses affected by the economic consequences of Russia’s invasion of Ukraine, including energy-intensive businesses.
The TCF provides guidance to the Member States on designing national support measures that will be quickly approved by the European Commission under EU State aid rules. First approvals are expected soon.
Key takeaways
- The following three kinds of aid schemes may become available over the coming weeks and months:
- Limited amounts of aid for businesses affected by the crisis of up to EUR 400,000 per undertaking, provided that the aid is granted on the basis of an aid scheme and is granted no later than 31 December 2022
- Liquidity support granted in the form of guarantees or loans at subsidized rates up to a certain turnover or energy costs threshold, subject to certain conditions
- Aid to compensate high energy prices of up to a maximum of EUR 2 million, increased to EUR 25 million for energy-intensive business (i.e., businesses for which purchases of energy products amount to at least 3.0% of the production value) and EUR 50 million for businesses active in certain particularly affected sectors, to compensate undertakings for the additional costs incurred due to exceptionally high gas and electricity prices
- This support can also be made available to businesses that are in financial difficulty.
- Sanctioned Russian-controlled entities are excluded from the scope of the TCF.
- Some Member States have already started to design TCF measures, including for energy-intensive businesses. Support under these measures is expected to become available shortly, i.e., as soon as the Commission has approved them.
In more detail
Russia’s invasion of Ukraine and the ensuing international sanctions cause serious disturbances across the EU and are set to have lasting consequences on the EU economy. In particular, certain industrial sectors are severely exposed to rising energy prices and disruption of trade flows, which may eventually pose a risk to the EU’s energy and food security of supply.
To enable Member States to quickly alleviate the economic consequences for affected businesses, the Commission adopted the TCF on 24 March. It applies to aid granted before 31 December 2022 and the Commission will review it sometime before then to decide whether it may need to be amended and/or extended.
The TCF recalls the State aid free options of support that Member States can introduce, including measures to relieve private consumers of rising prices (always provided that they do not give an indirect advantage to a certain sector or undertaking)[1] and measures available to all commercial energy consumers (e.g., general reductions of energy taxes or levies).
However, the focus of the TCF is on State aid support that the Commission will approve quickly on the basis of Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU).[2] The following two general conditions apply to all such TCF measures:
- The measure will support businesses affected by the Russian invasion and/or the consequences of the economic sanctions and the retaliatory countermeasures taken in response.
- The measure will be granted by 31 December 2022 at the latest.
Unlike under the COVID-19 Temporary Framework, State aid approved under the TCF can also be given to businesses that qualify as undertakings in difficulty under EU State aid law.
1. Aid of limited amount
Businesses may not receive aid exceeding EUR 400,000 per undertaking in the form of direct grants, tax and payment advantages or other forms (including repayable advances, guarantees, loans and equity).
The TCF lays down stricter conditions for aid to businesses active in primary agricultural production. In particular, they may not receive aid totaling more than EUR 35,000.
2. Liquidity support measures
Liquidity support can be provided in the form of guarantees or loans at subsidized rates, provided that they meet the conditions set out in the TCF. Notably:
- Loans/guarantees must not exceed a certain turnover threshold or 50% of the energy costs over a certain period of time, e.g., the last six months for large enterprises.
- Beneficiaries pay a minimum guarantee fee/interest rate, which varies according to the size of the undertaking and the duration of the guarantee/loan.
3. Support to address severe increases in natural gas and electricity prices
Member States can adopt support measures to mitigate the severe price increases in natural gas and electricity. The Commission will approve those measures quickly under the following conditions:
- The aid must be granted on the basis of a scheme. Member States may restrict aid to economic sectors that are deemed of particular importance, but this restriction must not be artificial.
- The aid must address the increase in gas and electricity prices incurred by the beneficiaries. Therefore, the price increase should be defined as the difference between: (i) the energy unit price paid by the beneficiary in 2022; and (ii) double the unit price paid by the same beneficiary in 2021. The eligible costs of the aid are the product of this energy price increase and the quantity of energy purchased by the beneficiary for its consumption.
- The overall aid per beneficiary must not exceed 30% of the eligible costs (calculated in accordance with the previous point), up to a maximum of EUR 2 million in total.
- The aid may be granted upfront, before the eligible costs have been incurred by the beneficiary. In this case, the granting authority must carry out an ex-post assessment and, if the maximum aid intensity or amount has been surpassed, claw back the excess amount.
Energy-intensive businesses may receive higher levels of aid, where this is necessary for the continuation of their economic activities, under the following conditions:
- The business’ purchases of energy products amount to at least 3% of its production value, and the increase in energy prices is responsible for at least 50% of its operating loss.
- The aid will not exceed one of the following amounts:
- 50% of the eligible costs (this amount is increased to 70% if the business is active in one of the sectors listed in Annex I of the TCF)
- 80% of the business’ operating loss
- EUR 25 million (this amount is increased to EUR 50 million if the business is active in one of the sectors listed in Annex I of the TCF)
When designing a support measure to address severe increases in natural gas and electricity prices, Member States are asked to consider environmental protection or security of supply conditions. For instance, beneficiaries could be required to invest a certain amount of the support in renewable energy consumption, energy efficiency improvements or diversification of its gas supplies.
Some Member States[3] have started to prepare TCF support measures. These measures are expected to become available to businesses shortly. They are likely of particular interest to energy-intensive businesses (e.g., the petrochemical industry, alumina producers, pulp/paper and glass producers) who can benefit from higher amounts of aid under TCF measures.
[1] For more information on how Member States can introduce such measures, see the Commission Communication of 8 March 2022 on “REPowerEU: Joint European Action for more affordable, secure and sustainable energy.”
[2] Article 107(3)(b) TFEU enables the Commission to approve national support measures “to remedy a serious disturbance in the economy of a Member State.”
[3] Including, e.g., France (see here and here) and Germany (see here).
