COMMISSION DECISION (EU) 2019/767

of 31 July 2018

on State aid SA.36511 (2014/C) (ex 2013/NN) Caps applied by France to the CSPE surcharge

(notified under document C(2018) 4975)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to those articles (1), and having regard to their comments,

Whereas:

1. PROCEDURE

(1) On 11 October 2013, following preliminary contacts between the Commission departments and France in the course of 2013, France notified its onshore wind support scheme, which had been funded up to then by an electricity surcharge known as the ‘contribution to the public electricity service’ (contribution au service public de l'électricité – ‘CSPE’).

(2) As the scheme had entered into force prior to notification, on 29 November 2013 the case was transferred to the register of non-notified aid.

(3) By letter of 27 March 2014, the Commission informed France that it had no objections to support for onshore wind, but that it had doubts about the compatibility with the internal market of the reductions in the CSPE granted to self-generating consumers, large electricity consumers and electro-intensive consumers. Consequently, it informed France that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of these CSPE reductions.

(4) The Commission's decision to initiate the procedure (‘the Opening Decision’) was published in the Official Journal of the European Union. The Commission invited interested parties to submit their comments on the measures in question and on the possible application to the CSPE reductions of the Guidelines on State aid for environmental protection and energy 2014-2020 (‘the 2014 Guidelines’) (2).

(5) The Commission received comments from five interested parties: (i) Air Liquide, by letter of 3 November 2014; (ii) EDF, by letter of 17 November 2014; (iii) the RATP, by letter of 2 December 2014; (iv) the SNCF, by letter of 3 December 2014, and (v) the Union des Industries Utilisatrices d'Énergie (UNIDEN), by letter of 3 November 2014. These comments concerned, on the one hand, the existence of State aid and, on the other hand, the compliance of the measures with the TFEU and also with the 2014 Guidelines.

(6) France submitted its comments through a memorandum of 5 May 2014, supplemented by a memorandum of 22 October 2015. In this correspondence, after recapping the various CSPE reductions, France firstly asserted that the CSPE reductions enjoyed by self-generating consumers did not constitute aid. It then stated that the cap on the CSPE per site and the cap on the CSPE of 0,5 % of value added were compatible with the State aid rules.

(7) During the formal investigation, the Commission sent seven requests for information between 21 August 2014 and 27 October 2017. The French authorities in turn submitted 11 memoranda and information documents between 7 May 2014 and 12 December 2017. These exchanges of information concerned (i) clarification of the amounts paid in CSPE and reductions granted to certain types of beneficiary, (ii) the classification of the measures as State aid and legal analysis of their compliance with the State aid rules, and (iii) the presentation of an adjustment plan intended to lower the reductions in CSPE to levels compatible with the applicable State aid rules. The first adjustment plan proposed was presented in the memorandum of 4 November 2014 and was finalised in the memorandum of 23 November 2017.

2. DESCRIPTION OF THE MEASURES

(8) This section outlines the CSPE surcharge and the reductions in it granted for the period 2003-2015. It is the reductions that are the subject of this Decision.

2.1. Presentation of the CSPE

(9) The CSPE surcharge was introduced by Law No 2003-8 of 3 January 2003 on the gas and electricity markets and on the public energy service (loi no 2003-8 du 3 janvier 2003 relative aux marchés du gaz et de l'électricité et au service public de l'énergie), ‘Law No 2003-8’). The scheme described in this Decision predates the 2016 CSPE reform introduced by Amending Finance Law for 2015 No 2015-1786 of 29 December 2015 (loi no 2015-1786 du 29 décembre 2015 de finances rectificative pour 2015, LFR 2015).

(10) The CSPE was intended to offset the extra costs associated with the public electricity service tasks borne by the incumbent electricity suppliers (EDF and local distribution companies). These extra costs stem mainly from the funding of four types of policy: (a) They derive firstly from an obligation imposed on EDF or local distribution companies (entreprises locales de distribution, ELD) to purchase electricity generated by certain types of plant producing electricity from renewable energy sources (wind, photovoltaic, etc.). This component accounted for 39 % of the CSPE collected over the entire duration of the measures, i.e. 2003-2015. (b) They also derive from the funding of high-efficiency cogeneration, which accounted for 25 % of the CSPE collected over the 2003-2015 period. In its memorandum of 20 December 2016, France stated that the CSPE was intended only to fund high-efficiency cogeneration. France there stated that this support had first taken the form of a purchase contract scheme applied between 1997 and 2001, which remunerated cogeneration facilities with an energy efficiency in excess of 65 %, and had subsequently taken the form of assistance, from 2013, for high-efficiency natural gas cogeneration facilities of more than 12 MW. (c) The extra costs further arise out of compensation given to electricity generators in non-interconnected areas (Corsica or overseas departments) so that in the electricity price paid by the final consumer the generators do not pass on the difference between the generation costs they have to bear and the generation costs borne in mainland France, which are lower because they incorporate the lower cost of nuclear energy. This item accounted for 31 % of the total CSPE collected over the entire period in question, i.e. 2003-2015. The system for keeping electricity prices in Corsica and in the overseas departments equivalent to prices applied in mainland France is otherwise known as ‘tariff equalisation’ (péréquation tarifaire). (d) Three per cent of these extra costs stem from implementing the social tariff known as the tariff for electricity as a ‘basic necessity’ (produit de première nécessité), and from covering some of the costs borne by electricity suppliers due to their financial participation in the scheme to help people living in poverty.

(11) The Commission notes that, in addition to these policies other policies were also funded out of the CSPE, albeit to a lesser extent. These measures accounted for less than 2 % of the CSPE collected. They mainly involved the following: (1) Support granted between 2003 and 2015 to plants generating electricity by incinerating household waste. EDF and local distribution companies were under an obligation at the time to purchase the electricity generated by these plants at a price set by ministerial order. The extra costs borne by these operators were offset out of the CSPE. France considers that the proportion of renewable energy generated by these plants was 50 %, in accordance with the rules of the International Energy Agency (IEA) and Eurostat on energy statistics. (2) Support for peak-demand facilities contributing to security of supply. These facilities are powered mainly by diesel and were built in the 1990s. They are called upon for a limited number of hours depending on the needs of the electricity system. (3) Support for various measures (EUR 221 million over the 2003-2015 period): firstly, funding of firm capacity contracts to encourage independent generation (electricity generating facilities with an output less than 8 000 kVA, facilities designed to use the calorific value of urban waste), presented by France as being ‘a useful addition’ to the public electricity service; secondly, funding of purchase contracts for the output of various generators.

(12) Article L.121-7 of the Energy Code (Code de l'Énergie) provides that costs attributable to public electricity service tasks are to be offset by contributions payable by final consumers of electricity established in the national territory. All these items therefore represent a single extra cost for French consumers. The contribution was paid by all final consumers of electricity in proportion to the kilowatt-hours (kWh) consumed, including by electricity self-generators. Between 2003 and 2015, the CSPE changed as follows: Changes in the amount of CSPE collected - 2003-2015 (EUR/MWh) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CSPE 3,0 3,3 4,5 4,5 4,5 4,5 4,5 4,5 9,0 10,5 13,5 16,5 19,5 Source: French Court of Auditors (Cour des Comptes) Report 2017.

(13) Where an eligible final consumer had exercised the rights granted in Article 22(III) of Law No 2000-108 of 10 February 2000 on the modernisation and development of the public electricity service (loi no 2000-108 du 10 février 2000 relative à la modernisation et au développement du service public de l'électricité, ‘Law No 2000-108’), and was supplied through the public transmission network or through a public distribution network, the consumer's contributions were collected by the operator responsible for the management of the network to which the consumer was connected, by way of a levy additional to the network usage tariff.

(14) The contributions collected by that operator were paid to the operators that bore the costs of the public service through the Caisse des dépôts et consignations (‘CDC’). The CDC paid out this contribution, four times a year, to those operators that bore the costs that the sums collected were intended to offset. On 1 January each year, it paid the national energy ombudsman a sum equal to the amount of its budget.

(15) The CDC recorded these various transactions in a special account. The management fees incurred by the CDC were determined annually by the Ministers for the Economy and for Energy. Where the sum of the contributions collected did not correspond to the total costs recorded for the year, an adjustment was made the following year through the contributions payable for that year. If the sums payable were not collected in the course of the year, they were added to the amount of the charges for the following year (3).

(16) Every year, in its annual report, the Energy Regulatory Board (Commission de régulation de l'énergie, ‘CRE’) assessed the operation of the scheme covering these public electricity service costs. The amended Decree No 2004-90 (Decree No 2004-90 of 28 January 2004 on the compensation of public electricity service costs – Décret no 2004-90 du 28 janvier 2004 relatif à la compensation des charges de service public de l'électricité) organised how this compensation worked: every year, before 15 October, the CRE proposed to the Minister for Energy the estimated costs for the following year and the unit contribution per kWh consumed in France that would allow these costs to be financed. The CRE's proposal was based on statements of recorded costs for the previous year (N – 1) and on statements of estimated costs for the following year (N + 1). These statements were provided by the operators incurring the costs. As explained in recitals 14 and 15, the collection of contributions was managed centrally by the CDC.

(17) The CRE checked the amount of the recorded costs. The costs of supporting renewable energies corresponded to the difference between the amount of support and the market price received by the accountable operator selling this energy. The amount of compensation was thus determined by a market price. The CRE defined the method for determining this market price. It did not correspond to the actual market value that the accountable operator secured, but to a reference value based on various parameters (forward market price and spot price with different weightings depending on the sub-sector, intraday market price, settlement price for imbalances) that allowed the behaviour of a competitive market player to be reflected more accurately in order to encourage the accountable operator to be competitive.

(18) Without prejudice to the application of the penalties provided for by law, if, within two months of the date on which it became payable, payment of the contribution was not made or was insufficient, the CRE sent a reminder letter together with a penalty for late payment, which was set at 10 % of the amount of the contribution due. If payment was still not made by a person liable for these contributions, the Minister for Energy imposed an administrative penalty under the conditions laid down by Article 41.

(19) Between 2003 and 2015, the CSPE amount collected by the operator responsible for managing the network totalled EUR 36,9 billion, divided as follows: CSPE amounts collected by EDF (EUR million) RE Cogeneration Tariff equalisation Social tariffs Miscellaneous Total 2003 129 689 332 0 69 1 219 2004 261 835 470 0 89 1 655 2005 186 810 501 98 99 1 694 2006 72 944 540 49 66 1 671 2007 (5) 560 921 (12) 2 1 466 2008 121 488 995 49 41 1 694 2009 293 499 780 42 42 1 656 2010 411 769 678 57 21 1 936 2011 1 231 784 767 32 68 2 882 2012 1 724 741 1 063 70 29 3 627 2013 2 667 823 1 462 134 60 5 146 2014 3 286 545 1 495 251 46 5 623 2015 4 057 626 1 618 304 58 6 663 14 433 9 113 11 622 1 074 690 36 932 Source: Memorandum from the French authorities to the Commission departments, 20 December 2016.

(20) Between 2003 and 2015, the composition of the CSPE changed as follows: Change in CSPE – 2003-2015 EUR billion Other Social tariffs Tariff equalisation Cogeneration RE 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Source: France – memorandum of 20 December 2016.

2.2. CSPE reductions

(21) The law provided for three types of reduction in the CSPE for certain consumers. These reductions could be combined: they are presented below: (a) For industrial customers consuming more than 7 GWh, the amount of the contribution was capped at 0,5 % of the undertaking's value added (Article L.121-21 of the Energy Code). (b) Article L.121-12 of the Energy Code then capped the amount of the contribution payable by final consumers per consumption site at EUR 627 783 (4). This cap was updated in line with inflation every year until 2013. In 2014 and 2015, the cap was increased at the same rate as the unit contribution, up to a maximum of 5 % per year. (c) Generators of electricity for their own use, up to a maximum of 240 GWh per year and per generating site, could also benefit from a CSPE exemption (Article L.121-11 of the Energy Code).

(22) Between 2003 and 2015, these various CSPE reductions, excluding transport undertakings, totalled EUR 6,8 billion, divided as follows: Value added Site Breakdown of CSPE reductions granted by type – 2003-2015 (EUR 6,8 billion) Site Self-generation Self-generation Value added Source: France – 15 November 2017.

(23) These caps are presented in detail below.

2.2.1. Contribution cap of 0,5 % of value added (Article L.121-21 of the Energy Code inserted by Article 67 of Programme Law No 2005-781 of 13 July 2005 laying down energy policy guidelines)

(24) The 0,5 % value added cap, which applied to industrial customers consuming more than 7 GWh per year, was established in 2005 through Programme Law No 2005-781 of 13 July 2005 laying down energy policy guidelines (loi no 2005-781 du 13 juillet 2005 de programme fixant les orientations de la politique énergétique), and was actually implemented in 2006.

(25) France has indicated that the 0,5 % cap was intended to preserve the competitiveness of electro-intensive undertakings, which are active mainly in the metallurgy, paper-making, chemical and other such sectors, in other words sectors exposed to international competition, and particularly undertakings whose consumption exceeded the threshold of 7 GWh per year, which also limited the impact on other categories of consumer.

(26) The capping of the CSPE at 0,5 % of value added had to be declared to the CRE, which carried out checks and then made the decision to reimburse the amounts due. These amounts were reimbursed only once the undertaking's added value was known (i.e. no earlier than during year N + 1 for amounts collected in year N).

(27) France has indicated that, out of a total of EUR 6,8 billion in reductions granted between 2003 and 2015, the CSPE 0,5 % value added cap accounted for 69 % (EUR 4,7 billion) of the total exemptions. According to the information provided by France, this cap applied to a total of 1 636 undertakings during the 2003-2015 period.

2.2.2. Contribution cap per site (Article L.121-12 of the Energy Code and Article 5 of Law No 2000-108)

(28) This cap was established when the CSPE was created, by Article 37 of Law No 2003-8 of 3 January 2003 referred to above (which amended Article 5 of Law No 2000-108). It entered into force in 2003. The CSPE site cap was initially set at EUR 500 000, and was then increased to EUR 550 000 through Article 37 of Finance Law for 2011, No 2010-1657 of 29 December 2010 (loi no 2010-1657 du 29 décembre 2010 de finances pour 2011). This article provided for the cap to be updated in line with the projected growth rate in the consumer price index, excluding tobacco, accompanying the draft finance law for the year. In 2013, the French Parliament set this cap at EUR 569 418 and, through Article 59 of the Amending Finance Law for 2013 (loi de finances rectificative pour 2013), adopted a new rule for updating it: it was to be updated each year in line with the change in the amount of the CSPE unit contribution, up to a maximum increase of 5 % per year. As at 1 January 2015, the cap stood at EUR 627 783.

(29) According to France, the CSPE site cap mirrored the 0,5 % value added cap, but per consumption site rather than per undertaking. France has also explained that the site cap allowed undertakings consuming a large amount of electricity at one site, without, however, being electro-intensive, to be included.

(30) France has indicated that, out of a total of EUR 6,8 billion in reductions granted between 2003 and 2015, the CSPE site cap accounted for 29 % (EUR 2,0 billion) of that amount. According to France, 522 undertakings benefited from this cap.

2.2.3. 240 GWh exemption threshold (Article L.121-11 of the Energy Code and Article 5 of Law No 2000-108)

(31) The exemption for self-generated electricity was carried over from the Public Electricity Generation Service Fund (Fonds du Service Public de la Production d'Électricité, FSPPE), a scheme which preceded the CSPE. This Fund was created by Article 5 of Law dated 10 February 2000 related to the modernisation and the development of public service of electricity. It was financed by electricity generators, suppliers and importers and by generators of electricity for their own use exceeding an amount of electricity generated per year that was set by decree. This amount was set at 240 GWh in Decree No 2001-1157 of 6 December 2001 on the public electricity generation service fund (décret no 2001-1157 du 6 décembre 2001 relatif au fonds du service public de la production d'électricité), adopted pursuant to Article 5 of Law No 2000-108.

(32) An electricity generator could be exempted from the contribution up to the number of kilowatt-hours generated and consumed by itself, subject to the cap of 240 GWh per generating site. The same generator could allow one consumer at the same site to benefit from the exemption, where the number of kilowatt-hours exempted by own consumption and sold to that consumer did not exceed the cap of 240 GWh per generating site.

(33) France has indicated that the aim of the exemption granted for electricity generated for own use was to limit the taxation of consumers generating their own electricity who, by financing their own facilities, had made the choice not to contribute to, but also not to benefit from, national energy policy.

(34) This exemption entered into force in 2002. It was preserved when the CSPE was created (in replacement of the FSPPE) in 2003, by Article 37 of Law No 2003-8: ‘The electricity generated by a generator for own use or purchased by a final consumer for own use from a third party operating a generating facility at the consumption site shall be taken into account for the purpose of calculating the contribution only above a threshold of 240 million kilowatt-hours per year and per generating site’.

(35) France has explained that, in practice, this exemption applied mainly to industrial sites, with the majority possessing cogeneration facilities (excluding electricity generation), and that, in addition, private individuals did not benefit.

(36) In 2011, 88 sites benefited from this own consumption exemption, with a total volume of 11 TWh having been exempted. Furthermore, 94,8 TWh, 84,6 TWh and 87,4 TWh were exempted in 2012, 2013 and 2014 respectively (5).

(37) According to France, 88 sites benefited from this exemption over the entire 2003-2015 period. This accounted for around 2 % of the total reductions granted, out of a total of EUR 6,8 billion.

2.3. Amount of CSPE reductions granted

(38) Over the entire period in question (2003-2015), the CSPE reductions totalled EUR 6,8 billion. The breakdown of these reductions by type is set out in Sections 2.2.1 to 2.2.3.

2.4. Beneficiaries of the measures

(39) The companies benefiting from the CSPE reductions were large electricity consumers, in around 227 sectors in the NACE classification. The main areas of activity in which they operated were metallurgy, the chemical and petrochemical industry, gas, paper-making, the nuclear industry, aeronautics, electronics manufacturing, vehicle manufacturing, agri-food and transport. One company could qualify under several exemption criteria simultaneously.

(40) The beneficiaries of the measures were eligible for one or more caps on the CSPE. According to the information provided by France, over the entire period in question (2003-2015), 1 664 undertakings benefited from CSPE reductions, which can be broken down as follows: 1 636 under the 0,5 % value added cap, 552 under the CSPE site cap and 88 (6) under the own consumption exemption. Some undertakings were able to combine several types of reductions.

2.5. Duration of the measures and 2016 reform

(41) The CSPE was introduced in 2003. Its amount and breakdown are set out in Sections 2.2.1 to 2.2.3.

(42) In 2015, it was replaced by a new scheme. The Amending Finance Law for 2015, No 2015-1786, reformed energy taxation, in particular the funding of public electricity and gas service charges. The CSPE was abolished for consumption after 31 December 2015.

(43) Since 1 January 2016, the policies previously funded by the CSPE have been financed through the State budget.

2.6. Exclusion from the scope of the Decision of the CSPE reductions granted to transport undertakings

(44) Given the specific regulatory framework applicable to rail transport undertakings (7), the CSPE reductions granted to those undertakings are excluded from this proceeding and will be the subject of a specific Commission decision. They are therefore excluded from the scope of this Decision.

(45) The total amount of the CSPE reductions set out in Section 2.2 consequently does not include the reductions granted to rail transport undertakings.

2.7. Grounds for initiating the procedure

(46) In its Opening Decision (8), the Commission considered that the measures constituted State aid for which sufficient evidence of compatibility with the internal market had not been provided.

2.7.1. Existence of aid

(47) The Commission considered that the CSPE reductions granted constituted State aid.

(48) First of all, it took the view that the various CSPE reductions provided for by law conferred a selective advantage on self-generating undertakings, large electricity consumers and electro-intensive consumers, for three reasons. Firstly, the CSPE exemption granted to undertakings generating their own electricity, as explained in recital 144 of the Opening Decision, constituted selective aid. Secondly, the Commission concluded that beneficiaries of the CSPE site cap had enjoyed an advantage granted only to certain economic sectors. Lastly, the CSPE 0,5 % value added cap applied only to industrial undertakings exceeding a certain consumption threshold, and therefore also conferred an advantage on those undertakings.

(49) The Commission then observed that the advantages resulting from the CSPE reductions, like the CSPE itself, had been financed by State resources and were imputable to the State. As the CSPE was a State resource, the reductions in the CSPE necessarily constituted a waiver of State resources.

(50) Lastly, the Commission also considered that the various CSPE reductions were likely to affect trade between Member States and distort competition, due to the different treatment of beneficiaries of the measures and their competitors who did not qualify.

2.7.2. Compatibility of the aid

(51) As regards the compatibility of the measures with the internal market, the Commission pointed out that, on the date of the Opening Decision, the CSPE was neither a harmonised environmental tax within the meaning of point 153 of the Community Guidelines on State aid for environmental protection of 2008, nor a non-harmonised environmental tax within the meaning of point 151 in conjunction with point 70(14) of the 2008 Guidelines (9).

(52) In that respect, it pointed out that the specific tax base did not necessarily have a negative effect on the environment, given that the CSPE was payable in part on renewable electricity. For the same reason, the CSPE could not be regarded as having the aim of internalising environmental costs. In addition, it did not aim to orient producers or end-consumers towards activities better respecting the environment. Rather, a reduction in consumption would have led to the need to increase the CSPE payable in order to cover the costs of producing renewable energy. Consequently, Chapter 4 (10) of the 2008 Guidelines was not applicable.

(53) However, the Commission considered that the measures aimed at reducing the CSPE could be assessed under Article 107(3)(c) TFEU and invited France to clarify how this should be done.

(54) The Commission also noted that the 2008 Guidelines were in the process of being revised and that the draft 2014 Guidelines contained the following points: ‘(180) The funding of support to energy from renewable sources through charges does as such not target a negative externality and accordingly has no direct environmental effect. However, it may result in higher electricity prices. The increase in electricity costs may be explicit through a specific charge which is levied from electricity consumers on top of the electricity price or indirect through additional costs faced by electricity suppliers due to obligations to buy renewable energy which are subsequently passed on to their customers, the electricity consumers. A typical example would be the mandatory purchase by electricity suppliers of a certain percentage of renewable energy through green certificates for which the supplier is not compensated. (181) In principle, all energy consumers should bear the costs of financing renewable energy support. However, some reductions may be needed to secure a sufficient financing base for renewable energy support (84). In order to avoid that undertakings particularly affected by the funding of renewable energy support are put in a difficult competitive situation, Member States may wish to grant partial compensation for additional costs so as to facilitate the overall funding of support to energy from renewable sources and avoid carbon leakage. With no compensation to particularly affected undertakings, public acceptance of setting up ambitious renewable energy support measures may be limited. On the other hand, if such compensation is too high or awarded to too many electricity consumers, public acceptance for renewable energy support may be equally hampered.’

(55) Lastly, the Commission pointed out that the draft 2014 Guidelines (paragraph 229) stated that aid granted in the form of reductions in the funding of support for energy from renewable sources would be assessed based on the new Guidelines on State aid for environmental protection and energy, once these were adopted (even if the aid was granted before the 2014 Guidelines entered into force).

(56) With France having provided very little information on the objective of the reductions and their justification, the Commission also expressed doubts about the compatibility of the aid with the internal market. It therefore invited France to clarify: (i) the objective of common interest served by the measure; (ii) its appropriateness; (iii) its incentive effect, and (iv) its sufficient avoidance of undue negative effects on trade.

(57) In its Opening Decision, therefore, the Commission considered that France had not sufficiently demonstrated the compatibility with the internal market of the measures to reduce the CSPE for certain beneficiaries.

2.8. Adoption of the 2014 Guidelines

(58) The 2014 Guidelines entered into force on 1 July 2014. They introduced a Section 3.7.2 on ‘Aid in the form of reductions in the funding of support for energy from renewable sources’.

(59) This section recognises first of all that charges collected to fund energy policies do not have a direct effect on the environment and do not constitute environmental taxes, in the strict sense of the term, which aim to increase the costs of environmentally harmful behaviour. However, they can indirectly contribute to environmental protection by allowing the funding of support schemes contributing to environmental protection.

(60) Secondly, the Guidelines point out that, in some cases, a scheme for funding such support measures through an electricity charge is feasible only if undertakings particularly affected by the financing costs of renewable energy support can benefit from reductions.

(61) Thirdly, the Guidelines determine the levels of reduction deemed acceptable in order to ensure the financial acceptability of the support measures, by preventing too great a burden being placed on other consumers.

(62) Lastly, Section 3.7.3 of the 2014 Guidelines sets out the possibility of adopting an adjustment plan in order to progressively adjust the levels of reduction applied by a national measure to levels that are compatible with the provisions of the Guidelines and proportional under the State aid rules.

3. COMMENTS BY INTERESTED PARTIES

(63) Excluding transport undertakings, which will be considered elsewhere, the following comments were made on the Opening Decision.

3.1. EDF

(64) EDF submitted its comments to the Commission on 17 November 2014. According to the EDF Group, approximately … % of the exemptions that it was granted stemmed from the consumption of self-generated electricity in order to produce electricity that was fed into the public network. According to EDF, this own consumption involved firstly the electricity consumption of auxiliary equipment in power plants, and secondly the electricity consumption of pumped storage stations at hydroelectric plants, electricity supplied in this second case by nuclear plants.

(65) EDF considers that this own consumption should benefit from a total exemption from the CSPE, firstly in accordance with Council Directive 2003/96/EC (11), referred to in paragraph 51, Article 14(1)(a) of which provides that Member States are to exempt from taxation energy products and electricity used to produce electricity and electricity used to maintain the ability to produce electricity, and secondly under the Decision validating, as State aid, the German ‘EEG-surcharge’ scheme laid down by the EEG 2014 Act (12).

(66) Furthermore, EDF underlines the need to ensure consistency between the energy-related charge exemption schemes of the various Member States, which in particular benefit electro-intensive industries. Different treatment of these exemptions in the Member States could increase the competitiveness gaps that currently exist in the various markets.

3.2. ALFI

(67) ALFI (Air Liquide France Industrie) submitted its comments to the Commission on 3 November 2014. ALFI underlines first of all that the energy costs it incurs represent … % to … % of its production costs. Secondly, ALFI maintains that an excessively large increase in the cost of electricity would result in the internalisation of industrial gas production by the various industries using these gases (chemical, steel, petrochemical, glass), but on a smaller scale, which would lead to a worldwide increase in energy consumption.

(68) Thirdly, ALFI denies that the CSPE reductions gave their beneficiaries an advantage. It contends that the reductions were simply a response to a ‘public service task’ of supply, and consequently could not constitute aid, although it does not specify the legal basis for this statement.

(69) Lastly, ALFI, while maintaining that there was in fact no aid, as explained in the preceding recital, argues that if the CSPE reductions were to be classified as State aid they would be compatible with Section 3.7.2 of the 2014 Guidelines, which recognises, under certain conditions, the compatibility of different contributions and reductions in contributions intended to benefit electro-intensive industrial undertakings. Consequently, recovery of the aid, if aid were shown to exist, would be ruled out in any case.

3.3. UNIDEN

(70) UNIDEN, an association representing the interests of energy-intensive industries in France, submitted its comments to the Commission on 3 November 2014. According to UNIDEN, the CSPE reductions pursued several objectives of common interest, which made the measures compatible under Article 107(3) TFEU and the 2014 Guidelines.

(71) Firstly, the measures pursued an objective of maintaining the competitiveness of industrial sectors exposed to global competition. Secondly, the measures pursued a social objective. Thirdly, the measures pursued an objective of economic, social and territorial cohesion, particularly consisting in the protection of the most disadvantaged consumers. Lastly, the measures pursued an objective of energy efficiency, which was fully consistent with European Union law.

4. COMMENTS BY FRANCE

(72) France has submitted comments on both the classification of the measures and their compatibility with the internal market.

4.1. The site cap and the cap at 0,5 % of value added did not constitute State aid

(73) The main arguments put forward by France to demonstrate the absence of aid are the absence of selectivity and the absence of distortion of competition.

4.1.1. No selectivity

(74) According to France, the measures were not selective for three main reasons:

(75) Firstly, it is settled case-law that the application of reductions in surcharges by Member States is not sufficient to establish the selectivity of the measure where it is can be supposed that undertakings exceeding the set thresholds are not in the same factual situation as other undertakings. Thus the Court of Justice has found that a site cap was not enough to constitute a selective measure and that caps on taxes do not necessarily constitute selective aid (13). As regards the CSPE 0,5 % value added cap, France refers to the case-law of the French Constitutional Council (Conseil constitutionnel), and argues that, in holding the CSPE to be compliant with the principle of tax equality, the court recognised that the beneficiaries of this cap were in a different factual situation from other undertakings, so that there was no selective aid (14).

(76) Secondly, with specific regard to own consumption, France argues that the CSPE exemption granted to self-generating consumers involved beneficiaries in a different factual situation from other contributors to the CSPE, which therefore rules out the selectivity of the aid.

(77) Thirdly, the absence of selectivity is proven by the nature of the French tax system, from which the measures stem and which is in no way selective. According to France, the CSPE caps derived from the very nature of the tax system, which provides that the tax burden must take account of each person's ability to pay.

(78) Lastly, for self-generating consumers who produce electricity from renewable energy (‘RE’) sources or from cogeneration, mainly in the chemical, iron and steel, and petrochemical sectors, France argues that it was logical for the electricity generated and consumed by them to be exempt from the part of the CSPE that funded RE or support for cogeneration, given that this electricity did not benefit from any public support funded by the CSPE, even though it contributed to the objective of environmental protection pursued by the support for RE and cogeneration funded by the CSPE in the same way as electricity fed into the network (which did benefit from support funded by the CSPE). France contends that, for this reason, the exemption of self-generating consumers using RE or cogeneration did not constitute a selective advantage.

4.1.2. No distortion of competition

(79) France claims that a similar measure existed before the CSPE entered into force in 2003. Consequently, the aid had only a small impact on the economic and competitive situation of undertakings established in France.

4.2. If the measures are classified as aid, the site cap and the cap at 0,5 % of value added constituted compatible aid

(80) If, however, the measures are classified as aid, France proposes an analysis of the compatibility of the CSPE from three different angles:

(81) Firstly, the measures were compatible because they complied with the provisions of Directive 2003/96/EC (see Section 4.2.1).

(82) Secondly, as the CSPE can be regarded as an environmental tax, reductions in it were fully compatible with the Community guidelines on State aid for environmental protection (‘the 2001 Guidelines’) (15), the 2008 Guidelines and the 2014 Guidelines (see Section 4.2.2).

(83) Thirdly, if the CSPE cannot be regarded as an environmental tax, the caps on it were, however, compatible with the 2014 Guidelines as regards the component of the CSPE that went to finance renewable energy, and with Article 107(3)(c) TFEU as regards the other components of the CSPE (see Section 4.2.3).

4.2.1. The measures were compatible because they complied with the provisions of Directive 2003/96/EC

(84) France points out that Directive 2003/96/EC permits certain exemptions:

(85) Firstly, Article 14(1)(a) of the Directive permits exemption from charges for electricity used to produce electricity or maintain the ability to produce electricity. This exemption largely covers the own consumption exemption included in the measures in question.

(86) Secondly, Article 15(1)(e) of the Directive permits exemption from charges for electricity that is produced for own consumption by cogeneration.

(87) Lastly, Article 17(1)(a) of the Directive permits partial exemption of ‘energy-intensive’ businesses, defined as business entities where either the purchases of energy products and electricity amount to at least 3 % of the production value or the energy tax payable amounts to at least 0,5 % of the added value.

4.2.2. If the CSPE was an environmental tax, the CSPE caps were compatible with the applicable State aid rules

(88) In its correspondence with the Commission, France considers that the CSPE can be regarded as an environmental tax, as defined by point 70(14) of the 2008 Guidelines. France takes the view that even though the CSPE aimed to finance renewable energy the tax base had a negative effect on the environment, and that the aid scheme was therefore favourable to the environment. If the CSPE is classified as an environmental tax, the compatibility of the measures with the internal market should be assessed using three successive bases of compatibility.

(89) Firstly, for the period from 2003 to 2008, the compatibility of the CSPE reductions should be assessed with regard to the 2001 Guidelines. According to France, the compatibility of the reductions is confirmed by the fact that the beneficiaries paid a significant part of the CSPE, i.e. at least 20 %, in accordance with points 51.1(a) and 51.1(b) of the 2001 Guidelines.

(90) Secondly, France considers that the measures complied with the 2008 Guidelines for the period from 2008 to 2014. On the one hand, France considers that the CSPE was an environmental tax. On the other hand, point 4 of the 2008 Guidelines provides that environmental taxes are compatible with the internal market. Consequently, according to France, the compatibility of the measures with the internal market is sufficiently demonstrated.

(91) Lastly, France takes the view that the two CSPE caps were compatible with the 2014 Guidelines, which applied between 1 July 2014 and the end of the measures in 2015, and that they complied in particular with point 170 of said Guidelines.

4.2.3. The caps were compatible pursuant to Section 3.7.2 of the 2014 Guidelines and Article 107(3)(c) TFEU

(92) In its memorandum of 22 October 2015, France did, however, agree to consider the possibility that the CSPE might not be regarded as an environmental tax and to draw the necessary conclusions as regards the analysis of its compatibility with the internal market pursuant to Section 3.7.2 of the 2014 Guidelines and Article 107(3)(c) TFEU.

4.2.3.1. Reduction in the CSPE in so far as it funded renewable energy

(93) According to France, it is clear that the measures complied with the 2014 Guidelines. France explicitly refers to Section 3.7.2 as the legal basis for assessing the compatibility of the measures with the internal market (16).

(94) Firstly, France notes that all aid granted before 1 January 2011 in the form of reductions in funding support for electricity from renewable sources can be declared compatible with the internal market, as stated in paragraph 248 of the 2014 Guidelines.

(95) Secondly, for the period after 2011, France considers that aid can be granted to the extent that it complies with an adjustment plan, based on objective criteria, to progressively adjust the levels of reduction applied by the measures in question to the levels authorised by Section 3.7.2 of the 2014 Guidelines.

(96) France argues that 50 % of the incineration support should be classified as renewable energy support, given that 50 % of the incinerated waste was biodegradable waste, as apparent from the IEA and Eurostat statistics.

4.2.3.2. Reduction in the CSPE in so far as it funded cogeneration, tariff equalisation and social tariffs

(97) As regards the part of the CSPE unrelated to the funding of support for electricity from renewable sources, France has provided a detailed compatibility analysis for the measures, which the Commission describes below.

4.2.4. Objective of common interest of the caps

(98) France considers that the Treaty provides a satisfactory legal basis for demonstrating the compatibility of the measure with the internal market as regards the caps on the part of the CSPE that concerned ‘policies other than the development of renewable energy, as the caps on the part of the CSPE that finances the development of renewable energies are … governed by the 2014 Guidelines’.

(99) France notes first that, under European legislation, it can be regarded as legitimate for electro-intensive undertakings not to bear excessive electricity charges if this is justified by objectives of common interest, which are (i) cogeneration, (ii) the objective of territorial cohesion and protection of the outermost regions, and (iii) the objective of social cohesion and the fight against exclusion. (1) Firstly, support for cogeneration is justified, on the one hand, by Directive 2004/8/EC of the European Parliament and of the Council (17) and, on the other hand, by the conclusions of the European Council of 7 and 8 March 2007 setting the objective of reducing energy consumption, in which cogeneration has an important role to play. France notes that the part of the CSPE used to support cogeneration could include support for the incineration of non-biodegradable waste, provided that this was used for high-efficiency cogeneration. (2) Secondly, tariff equalisation contributes to the Community objective of territorial cohesion, which is recognised by Article 3 of the Treaty on European Union (TEU). France also maintains that the objective of common interest of this policy is based on Article 174 TFEU, Article 349 TEU and Article 107(3)(a) TFEU. (3) Thirdly, according to France, the objective of common interest of social tariffs is supported by Article 3 TEU and Article 174 TFEU. France notes that the objective of this policy is also justified by Article 1 of the Charter of Fundamental Rights. France then refers to recital 45 to Directive 2009/72/EC of the European Parliament and of the Council (18), according to which ‘Member States should take the necessary measures to protect vulnerable customers in the context of the internal market in electricity’. France points out that, by guaranteeing access to a fundamental good, the social electricity tariff helps to protect human dignity.

(100) According to France, the CSPE site cap and 0,5 % value added cap pursued a second objective of maintaining the competitiveness of undertakings, supported by Article 173(1) TFEU. France further points out that Directive 2003/96/EC also allows Member States to apply exemptions in favour of energy-intensive undertakings in order to maintain their competitiveness, a possibility that the 2014 Guidelines (Section 3.7.2) also allow for the financing of renewable energy. If this objective of maintaining competitiveness is not sufficient to demonstrate the existence of a common interest, France considers that it does help to do so.

4.2.4.1. Necessity

(101) According to France, the necessity of the measures is duly demonstrated because they contributed towards strengthening the competitiveness of beneficiary undertakings and therefore to preventing risks of relocation. Moreover, as the measures were correctly targeted and the caps were correctly sized, they were not discriminatory. France points out the consistency of the thresholds chosen for the two types of exemption, the cap for the site being simply a mirror of the 0,5 % cap for value added. Lastly, the beneficiaries were selected according to transparent and objective criteria, aimed at targeting those undertakings most at risk of a loss of competitiveness.

(102) France also asserts that the measures were necessary because removing these reductions would have resulted in additional costs, estimated at between 12 % and 24 % of value added. France further maintains that an increase of EUR 2/MWh in energy bills would have increased production costs by 2 %, which was more than the ‘net margin’ of these undertakings. In this context, according to France, the additional financial effort that would have been required if CSPE reductions had been removed would simply have increased the risk of electro-intensive undertakings relocating and would have jeopardised the financing of the policies concerned by passing on the burden to other consumers.

4.2.4.2. Appropriateness

(103) Likewise, France considers that the appropriateness of the measures is confirmed by Directive 2003/96/EC, which allows undertakings paying an energy tax of 0,5 % of their value added to benefit from exemptions above that threshold, due to the lack of tax harmonisation and the risks of a loss of international competitiveness.

(104) According to France, the CSPE reductions were therefore appropriate in the absence of full tax harmonisation and taking into account the major deterioration in European competitiveness.

4.2.4.3. Proportionality

(105) France then states that the CSPE reductions were proportionate. They corresponded to an average contribution of 31 % to 34 % of the total contribution, i.e. between EUR 5,1/MWh and EUR 5,6/MWh (2014 estimate), to be compared with a CSPE of EUR 16,5/MWh (on the same date). France argues that this rate of 31 % to 34 % was higher than the minimum rate permitted by the 2008 Guidelines, and also by Sections 3.7.1 and 3.7.2 of the 2014 Guidelines, and that it was therefore proportionate.

(106) According to France, the reductions could therefore be regarded as proportionate, in that they left their beneficiaries to pay a sufficiently substantial part of the CSPE.

(107) France has notified the amounts paid in CSPE by individual beneficiaries in 2014. The Commission notes that, for 2014 alone, at least 124 beneficiaries paid a level of CSPE less than the 15 % rate laid down in paragraph 188 of the 2014 Guidelines.

4.2.4.4. Incentive effect of the measures

(108) France considers that this condition is not applicable here. It argues that the measures were intended not to encourage beneficiaries to change their behaviour, but rather to try to avoid a loss of competitiveness.

4.2.4.5. Limitation of distorting effects on competition and positive cost-benefit ratio

(109) France maintains in this respect that the CSPE exemptions in fact limited distortion of competition. In its comments, France contends that, despite the CSPE caps, the price differential for electro-intensive undertakings between France and the United States remained significant – in the order of EUR 10/MWh. France also cites an ICF study to point out that France grants fewer exemptions than Germany, Italy or Denmark (19).

4.2.4.6. Compatibility of the CSPE caps where the CSPE was used for objectives other than funding electricity generation from renewable energy and high-efficiency cogeneration, support for tariff equalisation or social tariffs

(110) Lastly, as regards the other components of the CSPE, described in recital 11(1) to (3), France has put forward the following arguments: (1) With regard to the support for the incineration of biodegradable waste, France draws attention first to the existence of a common interest in incineration as far as it concerns renewable energy. As regards incineration involving non-biodegradable waste, France argues that this support was aimed at improving energy efficiency. France contends that the measures were proportionate in that the feed-in tariff allowed a rate of return of between 6 % and 7 % to be achieved. Lastly, the measures did not have any distorting effect, as all incineration plants were eligible for the scheme. (2) The support for peak-demand facilities served another objective of common interest, namely security of supply. This support was needed so that investments could be made. Lastly, France considers that the limited power of the facilities concerned (78 MW in 2014) limited the distorting effect. (3) Finally, as regards the funding of firm capacity contracts, France has not explained the necessity or appropriateness of such support.

4.3. The CSPE exemptions granted to self-generating consumers did not constitute State aid

(111) As a preliminary comment, France argues that in the case of own consumption for the production of electricity the exemption was fully compatible with Directive 2003/96/EC, which provides that small producers of electricity can be exempted from an electricity tax provided that the energy products used for the production of that electricity are taxed in another way.

(112) As regards the existence of aid, France explains first that these CSPE exemptions did not constitute selective aid. The exemption did not depend on the type of activity of the beneficiary, and applied in principle to all undertakings up to a maximum capacity of 240 GWh. In addition, the beneficiaries did not place any burden on the electricity system in respect of the electricity they generated themselves. It was therefore legitimate for them to be treated differently from consumers purchasing all their electricity.

(113) France then argues that the CSPE exemption granted to self-generating undertakings did not distort competition, because several countries, within the European Union in particular, applied the same type of exemption. This exemption consequently could not constitute State aid.

(114) As regards the compatibility of the exemption, France considers that, even if the exemption of self-generating consumers did constitute aid, it was in pursuit of an objective of common interest, namely contributing to security of supply by mitigating the effects of peak electricity consumption.

4.4. Adjustment plan following adoption of the 2014 Guidelines

(115) Having put forward the argument that the measures were compatible with the internal market on the basis of Section 3.7.2 of the 2014 Guidelines and Article 107(3)(c) TFEU, as explained in Section 4.2.3, France drew the necessary conclusions in a letter to the Commission dated 27 October 2017. In the letter France notified a new version of the adjustment plan, applying Section 3.7.3 of the 2014 Guidelines, aimed at bringing the reductions granted by the measures into line with the exemption levels compatible with the Guidelines defined in Section 3.7.2 thereof, in accordance with objective rules.

(116) This calculation of the CSPE allocated to the different objectives makes it possible to calculate the amount to be paid by beneficiaries of the CSPE reductions under the adjustment plan. The amount is between the amount already paid in CSPE and the amount calculated under the Guidelines. The amount to be paid in CSPE is calculated differently depending on the CSPE component concerned, and is determined as indicated in Section 4.4.1.

4.4.1. Direct application of Section 3.7.3 to the ‘funding of renewable energy’ component of the CSPE

(117) For the part of the CSPE used to fund renewable energy, including the incineration of biodegradable waste, France envisages an adjustment plan such that, gradually, by the theoretical date of 1 January 2019, given that the CSPE was suspended on 1 January 2016, the amount to be paid in CSPE becomes that calculated according to the 2014 Guidelines:

(118) If the undertaking (i) belongs to a sector listed in Annex 3 to the 2014 Guidelines and has an electro-intensity in excess of 20 % or (ii) has both an electro-intensity of at least 20 % and an exposure to international trade in excess of 4 % (or the figure indicated in Annex 5 to the Guidelines), then the undertaking must pay either 15 % of the surcharge or 0,5 % of its value added, whichever is the lower.

(119) If the undertaking belongs to a sector listed in Annex 3 to the 2014 Guidelines and has an electro-intensity of less than 20 %, then it must pay either 15 % of the surcharge or 4 % of its value added, whichever is the lower.

(120) In other cases, if (i) the undertaking belongs to a sector that is not listed in Annex 3 to the Guidelines, or (ii) it belongs to a sector listed in Annex 5 but has an electro-intensity of less than 20 %, and (iii) it benefited from aid before 1 July 2014, then it must pay at least 20 % of the surcharge.

(121) Lastly, in all other cases, the CSPE level to be reached by 1 January 2019 is 100 %.

4.4.2. Application of Section 3.7.3 by analogy to the cogeneration, tariff equalisation and social tariffs components of the CSPE

(122) For cogeneration, tariff equalisation and social tariffs, the adjustment plan is such that, by 2019 at the latest, the CSPE amount paid is: — 15 % if the undertaking is an electro-intensive undertaking within the meaning of paragraphs 185 to 186 of the 2014 Guidelines; if the undertaking has an electro-intensity in excess of 20 % and belongs to a sector listed in Annex 3 or Annex 5 to the Guidelines, then the CSPE amount can be limited to 0,5 % of the undertaking's value added and to 4 % if the undertaking does not have an electro-intensity reaching or exceeding 20 %; — 100 % for other undertakings.

(123) France considers that this adjustment plan is justified for the same reasons as those set out in Section 3.7.3 of the 2014 Guidelines on reductions in charges intended to fund renewable energy. In particular, the adjustment plan avoids the excessively abrupt increase in the burden that would result from immediately applying the criteria set out in paragraphs 185 to 189 of the 2014 Guidelines. In this respect, it contributes to the financial sustainability of the CSPE, while ensuring the acceptability of the support and its methods of financing.

4.4.3. Non-application of the adjustment plan to the other components of the CSPE

(124) However, with regard to the reduction in the CSPE allocated to the objectives described in recital 110(1) to (2), France has not included these objectives in the adjustment plan. France has confirmed that the CSPE allocated to these objectives should be paid in full for the period in question (2003-2015) (20) and that the reductions granted in the CSPE allocated to these objectives will be recovered in full.

4.4.4. Start date of the adjustment plans

(125) For the RE and cogeneration components, France will start the adjustment plan with effect from 2011. France relies in this respect on paragraph 248 of the 2014 Guidelines and on the Commission Decisions of 15 June 2017 (SA.38635 (21)) and 21 September 2017 (SA.47887 (22)).

(126) For the other components funded by the CSPE, following the doubts expressed by the Commission in the Opening Decision, France will start the adjustment plan with effect from 2004. France considers that this date is justified by the ten-year limitation period applicable in this case pursuant to Article 17 of Council Regulation (EU) 2015/1589 (23).

4.4.5. Treatment of own consumption in the adjustment plan

4.4.5.1. Exemption from the CSPE for the consumption of electricity used to produce electricity

(127) According to France, Article 14 of Directive 2003/96/EC, which provides that the consumption of electricity used to produce electricity and to maintain the ability to produce electricity is fully exempt from taxation, allows beneficiaries of the own consumption allowance who are electricity producers (NACE code 3511) to be exempted from the CSPE on electricity that they consume. Consequently, France considers that these beneficiaries should not be included in the adjustment plan.

4.4.5.2. Electricity produced from RE for own consumption

(128) For beneficiaries of the allowance who produce electricity from RE, the electricity produced for their own consumption can be exempted from the part of the CSPE that funded RE, given that such electricity received no public support whilst the CSPE was funding partial support for RE.

(129) However, France's adjustment plan does cover the exemption from the rest of the CSPE, except where the corresponding advantage is less than the ceiling for de minimis aid.

4.4.5.3. Electricity produced from cogeneration for own consumption

(130) In the same way, for beneficiaries of the reduction who produce electricity from cogeneration, the electricity produced for own consumption can be exempted from the part of the CSPE that funds cogeneration, given that such electricity has not received any public support.

(131) However, France's adjustment plan does cover the exemption from the rest of the CSPE, except where the corresponding advantage is less than the ceiling for de minimis aid.

4.4.6. Methodology for the allocation by policy of the CSPE theoretically payable, excluding exemptions

(132) For the CSPE to be paid, excluding exemptions, France has made a calculation for each undertaking, based on the annual rate and consumption of the undertaking. This theoretical amount of CSPE is allocated by policy according to the breakdown provided by the CRE and notified to the Commission on 20 December 2016: RE (%) Incineration (%) Cogeneration (%) Tariff equalisation (%) Social tariffs (%) Peak-demand production (%) Miscellaneous (%) 2003 11 2 57 27 0 2 1 2004 16 3 50 28 0 2 1 2005 11 2 48 30 6 3 1 2006 4 1 57 32 3 2 1 2007 0 – 3 38 63 – 1 2 1 2008 7 – 1 29 59 3 3 1 2009 18 0 30 47 3 1 1 2010 21 – 1 40 35 3 1 1 2011 43 1 27 27 1 0 1 2012 48 0 20 29 2 0 0 2013 52 1 16 28 3 0 0 2014 58 1 10 27 4 0 0 2015 61 1 9 24 5 0 0 Total 41,9 0,6 23,0 30,5 2,9 0,7 0,5 Annual weight of each policy – memorandum from the French authorities of 20 December 2016

(133) France stresses that RE, cogeneration, tariff equalisation and social tariffs account for 98,2 % of the CSPE amounts borne since 2003.

(134) As regards incineration, France points out that the IEA and Eurostat statistics allow half of the energy produced by household waste incineration plants in the form of heat or electricity to be counted as renewable. Consequently, 50 % of the CSPE allocated to support incineration is included in the RE component. Moreover, support for the incineration of non-biodegradable waste used for high-efficiency cogeneration is allocated to the cogeneration component of the CSPE. France accordingly opts for the following breakdown: RE (%) Cogeneration (%) Tariff equalisation + social tariffs (%) Incineration of non-biodegradable waste (%) Miscellaneous (%) 2003 12 57 27 1 3 2004 17 50 28 2 2 2005 12 48 35 1 4 2006 5 57 35 1 3 2007 – 2 38 62 – 2 3 2008 6 29 62 – 1 4 2009 18 30 50 0 2 2010 21 40 38 – 1 2 2011 43 27 28 1 1 2012 48 20 31 0 1 2013 52 16 31 0 0 2014 59 10 31 0 0 2015 61 9 29 0 0

4.4.6.1. Application of de minimis ceilings

(135) France states that, for each of the CSPE reductions granted, the de minimis ceiling laid down by Commission Regulation (EU) No 1407/2013 (24) has been applied. For each beneficiary, the amount of aid granted over the last three years on a rolling basis is compared with the amount of EUR 200 000. If the amount of aid granted over the last three years on a rolling basis is less than EUR 200 000, the amount of the repayment is zero for those three years. France states that it will also take account of Commission Decision N 7/09 (25) providing for an increase in the de minimis ceiling to EUR 500 000 for the years 2009 and 2010 in order to allow for the economic crisis at the time.

4.4.7. Progressive application of the adjustment plan

(136) For beneficiaries that cannot be classified as electro-intensive undertakings within the meaning of paragraphs 185 to 187 of the 2014 Guidelines, or that do not fully comply with the provisions of Section 3.7.2 of those Guidelines, France has submitted an adjustment plan leading to a gradual increase in their contribution (see recitals 117 and 118).

(137) This adjustment plan applies to all components of the CSPE. It corrects all the caps and exemptions granted under the measure. It also covers all the policies funded by the CSPE.

(138) The starting point of the adjustment plan is the CSPE actually paid by beneficiaries for the year in which the plan starts (2004 or 2011 as applicable).

(139) This adjustment plan for the various CSPE reductions granted must lead to the amounts paid reaching the minimum contribution levels required by the State aid rules by 1 January 2019 at the latest. The CSPE amount should reach the levels called for in recitals 118 to 122.

(140) This increase is achieved by applying the following progression rule:

(141) Amount to be paid per year per policy funded = amount paid

(142) + (amount to be paid – amount paid) × [(e^n)-1]/[(e^N)-1] where n: year number of the adjustment plan (e.g.: for a plan starting in 2011 that must be fully applied in 2019, in 2011 n = 0, in 2012 n = 1, …, in 2019 n = 8) and N: number of years of the plan (e.g.: for the same example as above, N = 8).

(143) This rule means that the CSPE amount to be paid moves closer over time to the theoretical CSPE level to be paid by 2019. As the CSPE was abolished in 2016, the adjustment plan will not, however, be applied beyond 2015.

(144) The function used to go from this starting point to the theoretical end point is progressive.

4.4.8. Calculation of the sums to be recovered

(145) The adjustment plan provides for the CSPE amounts that have been exempted beyond the levels authorised by the adjustment plan to be recovered.

(146) The amount to be repaid is the difference between (i) the CSPE to be paid as described in Sections 4.4.1 to 4.4.7 and (ii) the CSPE actually paid by beneficiaries. This amount is calculated per beneficiary and per year.

(147) In the case of beneficiaries of the own consumption allowance who produce electricity from RE or cogeneration for their own consumption, the minimum level of CSPE is zero for the CSPE that funded RE or cogeneration as the case may be.

(148) If, for a given beneficiary and a given year, the amount paid for a given policy is at least the amount to be paid according to the minimum level of CSPE required, then the amount used for the adjustment plan is the minimum level of CSPE that must be paid for that year. In this case, the excess paid is not deducted from the amount to be recovered from the particular beneficiary as a result of the calculation made for other years.

(149) In its memorandum of 11 October, France provided a preliminary estimate of the sums to be recovered, which was EUR 31 million. Around 700 undertakings could be subject to recovery. However, France has stated that the assessment of this amount must be finalised once the information on the reductions per beneficiary has been gathered for all the years.

5. THE COMMISSION'S ASSESSMENT

5.1. Existence of aid

(150) As stated in Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.

(151) The Commission has assessed whether the various CSPE reductions can be classified as aid in the light of these provisions.

5.1.1. State aid classification of the CSPE site cap and 0,5 % value added cap

5.1.1.1. Aid imputable to a Member State and granted through State resources

(152) The Commission concluded in Section 3.1.1 of the Opening Decision that the CSPE constituted a State resource.

(153) The Commission notes first of all that no interested party has disputed the conclusion referred to in the above recital.

(154) The Commission points out that, according to the case-law of the Court of Justice, only advantages granted directly or indirectly through public resources can be regarded as State aid within the meaning of Article 107(1) TFEU.

(155) The simple fact that an advantage is not directly funded through State resources is not sufficient to rule out the involvement of State resources. According to the case-law of the Court of Justice, it is not necessary to establish that there has been a transfer of funds, from the general budget of the State or a public entity, for an advantage granted to one or more undertakings to be capable of being regarded as a State aid within the meaning of Article 107(1) TFEU (26).

(156) According to the case-law of the Court of Justice and the Commission's well-established decision-making practice, funds resulting from State levies, managed and apportioned in accordance with the provisions of national legislation, constitute State aid within the meaning of Article 107(1) TFEU even if they are managed by a public or private entity (Essent (27), Vent De Colère (28)).

(157) The Court of Justice has already confirmed that the CSPE constituted a State resource. It did so in its judgment of 19 December 2013, Vent de Colère (29)), which concerned the obligation to purchase wind-generated electricity described in recital 10(a) above and funded by the CSPE.

(158) Thirdly, the Commission points out that the advantage was imputable to the State because the caps resulted from the applicable law and administrative acts which determined the scheme and rules for applying those caps.

(159) The state nature of the CSPE is also confirmed by the mechanism adopted by France for collecting this contribution. As explained in recitals 14 and 15, the CSPE was centrally collected by the CDC, which is a public entity, meaning that the CSPE was financially managed by a public entity controlled by the State, which supports the conclusion that it should be classified as a State resource.

(160) Consequently, the Commission confirms the findings it made in its Opening Decision. The CSPE, and in particular the caps on it, were imputable to the State and were granted through State resources.

5.1.1.2. Economic advantage and selectivity

(161) When assessing the existence of an advantage, the Commission notes that, according to the case-law of the Court of Justice, measures which, in various forms, mitigate the charges borne by an undertaking and which, without being subsidies in the strict meaning of the word, are similar in character to State aid are therefore considered to constitute State aid (30).

(162) In the present case, the Commission points out that Article 5 of Law No 2000-108 (as amended by Article 37 of Law No 2003-8) established the principle that the CSPE was payable by final consumers of electricity established on French territory and that the amount of the CSPE was to be calculated in proportion to the quantity of electricity consumed. By exempting from the CSPE any electricity consumed in excess of the site cap, or in the case of electro-intensive industrial undertakings 0,5 % of the value added, the State mitigated the CSPE charges that beneficiary undertakings should otherwise have paid. The site and value added caps therefore conferred advantages on the beneficiary undertakings.

(163) With regard to the existence of a selective advantage, the Court of Justice found in its judgments of 21 December 2016, in Commission v World Duty Free Group and Commission v Banco Santander and Santusa (31), that, in order to establish the selectivity of a tax measure or charge, it must be determined whether that measure or charge introduces, between operators that are, in the light of the objective pursued by the general tax system concerned, in a comparable factual and legal situation, a distinction that is not justified by the nature and general structure of that system.

(164) The concept of aid does not, however, cover measures which differentiate between undertakings in relation to charges where that differentiation is the result of the nature and general scheme of the system of levies in question. It is for the Member State which has introduced such a differentiation between undertakings in relation to charges to show that it is actually justified by the nature and general scheme of the system in question (32).

Reference system

(165) The Commission points out that Article 5 of Law No 2000-108 (as amended by Article 37 of Law No 2003-8) established the principle that the CSPE was payable by final consumers of electricity established on the French territory and that the CSPE amount was to be calculated in proportion to the quantity of electricity consumed. The CSPE was used to fund the following measures: (a) an obligation imposed on EDF or local distribution companies to purchase electricity generated by certain types of plant producing electricity from renewable energy sources; (b) the financing of high-efficiency cogeneration; (c) compensation given to electricity generators in non-interconnected areas (Corsica or overseas departments) so that in the electricity price paid by the final consumer the generators do not pass on the difference between the generation costs they have to bear and the generation costs borne in mainland France (tariff equalisation); (d) implementing the ‘basic necessity’ social tariff and covering some of the costs borne by electricity suppliers due to their financial participation in the scheme to help people living in poverty; (e) other objectives, mainly support for incineration and peak-demand generation, involving less than 2 % of the CSPE collected.

Differentiation between undertakings in a comparable factual and legal situation with regard to the objective of the measures in question

(166) The Commission points out that the undertakings benefiting from the CSPE site cap and 0,5 % value added cap were in the same factual situation as other final consumers with regard to the objectives of the CSPE. Firstly, they were electricity consumers, and there was nothing to suggest that the consumers benefiting from the caps were any different from the consumers not benefiting from the caps with regard to the objectives of funding support for renewable energy, cogeneration, tariff equalisation and social tariffs. Those beneficiaries should therefore have contributed in the same proportion as other final consumers to the funding of the public electricity service.

(167) In addition, the eligibility criteria for the site cap and 0,5 % value added cap resulted in further discrimination within the group of undertakings likely to be covered by those caps.

(168) Firstly, the 0,5 % value added cap, the stated intention of which was to cover electro-intensive undertakings, was actually reserved solely for larger undertakings, due to the minimum consumption threshold for eligibility of 7 GWh per year. As a result, electro-intensive undertakings for which the CSPE exceeded 0,5 % of value added, but which had a lower annual consumption, were not eligible for the value added cap, even though they had the same electro-intensity and were active in the same sector. In addition, the value added cap was reserved for industrial undertakings, to the exclusion of electro-intensive undertakings active for example in the service sector. The Commission concludes that none of these points of distinction is explained by the nature and objective of the CSPE.

(169) Secondly, as regards the site cap, Law No 2000-108 (as amended by Article 37 of Law No 2003-8) capped the CSPE at EUR 500 000 – initial amount – per consumption site. The Commission notes that, according to additional information provided by France, and based on the value of the cap and the CSPE in 2013, this cap corresponded to an annual consumption of 42 GWh. Such consumption is achieved only by certain economic sectors, as confirmed by France in the information provided on the sectors concerned. The cap therefore gave a selective advantage to certain undertakings or certain sectors and cannot be explained by the logic of the CSPE. The Commission concludes that, as regards this second cap, none of these points of distinction established by the law is explained by the nature and objective of the CSPE.

(170) With regard to France's argument, outlined in recital 77, that the CSPE caps were justified by the application of the principle that charges should be levied on the basis of the taxpayer's ability to pay, the Commission notes that France has not proven that this is an underlying principle of the CSPE. Nor has France shown that the undertakings that did not qualify for the cap were capable of paying, which is necessary in order to demonstrate that these caps were consistent with the logic of the system. Lastly, France has not proven that the undertakings that did qualify for the cap were all unable to pay a higher amount in CSPE (33).

(171) In addition, the site cap was applied without any link to the taxpayer's ability to pay. While it may be accepted that there is a link between ability to pay and the turnover or value added of an undertaking, the site cap resulted in exemption from the CSPE on everything above the cap, regardless of any growth in turnover or value added. Consequently, the argument put forward by France in recital 77 is not admissible.

(172) Lastly, the Commission notes that the value added cap does seem to have been linked to the ability to pay of the undertaking concerned. However, even if the CSPE were based on the principle of the ability to pay, which France has not demonstrated, the value added cap would still have been selective, because it was not applied in a non-discriminatory manner to all undertakings in the same factual and legal situation. The value added cap was in fact limited to industrial undertakings only, to the exclusion of non-industrial undertakings. However, the latter could have had an electricity consumption such that the application of the 0,5 % value added cap would have been justified. Furthermore, the value added cap was also limited solely to undertakings large enough to reach an annual consumption of 7 GWh, to the exclusion of smaller undertakings not reaching that threshold even though the CSPE reached 0,5 % of their value added.

(173) For these reasons, the Commission concludes that the various caps provided for by the law constituted a selective advantage to the benefit of certain undertakings or sectors of the economy, and it therefore confirms the analysis it set out in the Opening Decision of 16 September 2014. The measures conferred an advantage on their beneficiaries, compared with the reference system that required all final consumers to participate in the system in order to fund the objectives of the CSPE. In this respect, the Commission does not agree with the position of ALFI set out in recital 68 nor with that of France set out in recitals 74 to 78.

(174) Lastly, as indicated in recital 164, France has not proven that this difference in treatment resulted from the system of levies in question. The burden of proof rests with the Member State in this respect.

5.1.1.3. Impact on competition and trade between Member States

(175) The undertakings benefiting from the CSPE site cap and value added cap were in competition with undertakings from other Member States (metallurgy, papermaking, agri-food, chemicals, etc.). Thus the site and value added caps were likely to have an impact on competition and trade between Member States.

(176) Consequently, the Commission does not agree with the position defended by France and set out in recital 79.

5.1.1.4. Conclusion on existence of aid

(177) For the reasons set out in recitals 48 to 50, the Commission confirms the findings made in its Opening Decision and therefore considers that the site cap and value added cap constituted State aid.

5.1.2. CSPE exemptions granted for own consumption intended for the production of electricity

5.1.2.1. Aid imputable to a Member State and granted through State resources

(178) For the same reasons as those set out in Section 5.1.1.1, the Commission confirms that these exemptions were imputable to the Member State and granted through State resources.

5.1.2.2. Impact on competition and trade between Member States

(179) The undertakings benefiting from these CSPE exemptions (mainly electricity generators with nuclear plants and hydroelectric plants using pumped storage stations) were in competition with undertakings from other Member States. Consequently, these exemptions were likely to have an impact on competition and trade between Member States.

(180) France considers that the CSPE exemption granted to self-generating undertakings did not distort competition, as several countries, within the European Union in particular, applied the same type of exemption, as explained in recital 79.

(181) It is settled case-law that a measure implemented by a Member State is regarded as distortive when it strengthens the competitive position of a beneficiary compared with its competitors (34). This is the case where a measure reduces the costs that are normally borne by an undertaking. In addition, the Court of Justice has already decided that unilateral measures through which a Member State seeks to approximate the conditions of competition in a particular sector to those prevailing in other Member States cannot deprive the measures in question of their character as State aid (35).

5.1.2.3. Economic advantage and selectivity

(182) The Commission notes that, at first sight, the exemption conferred an advantage on self-generators. As already mentioned in recital 162, the CSPE was payable by final consumers of electricity established on French territory and the amount of the CSPE was to be calculated in proportion to the quantity of electricity consumed. By exempting part of the own consumption from the CSPE, the State mitigated the CSPE charges that beneficiary undertakings should otherwise have paid.

(183) The Commission next has to assess whether this advantage was selective. Firstly, the reference system – the CSPE – has been described in recital 165. It consisted of a charge that was payable by all final consumers of electricity on their electricity consumption. The charge was collected in order to fund support measures pursuing specific objectives.

(184) Secondly, the Commission must ascertain whether granting an allowance for own consumption with a view to the production of electricity is consistent with the logic of a system of levies on electricity. The consumption of electricity in order to produce electricity constitutes (final) electricity consumption. In this respect, the electricity consumption of an electricity generator cannot be distinguished from the electricity consumption of another consumer with regard to the objectives of the CSPE, and the partial exemption of own consumption in order to produce electricity seems to result in an unjustified difference with regard to the CSPE objectives. The Commission therefore concludes that the measure seems prima facie to be selective, because it introduces a differentiation between undertakings that are in a comparable factual and legal situation with regard to the CSPE objectives.

(185) France, however, maintains that the exemption is intended to prevent double taxation, which is a generally accepted principle of tax systems.

(186) Without the exemption, the electricity consumed by the final consumer would be subject to the CSPE twice: once on electricity A used to produce electricity B and once on electricity B generated from electricity A.

(187) The Commission has already recognised that the prevention of double taxation is a principle generally found in systems of charges raised on the consumption of electricity (36), as well as in other tax systems (37). It is also this principle that led to the adoption of Article 14(1)(a) of Directive 2003/96/EC of 27 October 2003. The Commission therefore endorses the argument put forward by France outlined in recital 111.

(188) The Commission therefore considers that the exemptions granted to undertakings generating electricity to produce electricity were justified by the nature and general scheme of the CSPE charging system.

(189) Consequently, the Commission considers that the exemptions for the own consumption of electricity in order to produce electricity did not constitute a selective advantage. It concludes that the CSPE exemptions granted to self-generating sites using electricity to produce electricity did not constitute State aid.

5.1.2.4. Conclusion on existence of aid

(190) For the reasons set out in recitals 178 to 189, the Commission concludes that the CSPE exemptions granted for the own consumption of electricity to produce electricity did not constitute State aid.

(191) The Commission therefore confirms the conclusions of France, as set out in recital 127, according to which no adjustment plan is required for these beneficiaries.

5.1.3. CSPE exemptions granted for the own consumption of electricity self-generated from high-efficiency cogeneration and renewable energy as regards the part of the CSPE allocated to fund these objectives

5.1.3.1. Aid imputable to a Member State and granted through State resources

(192) For the same reasons as those set out in Section 5.1.2.1, the Commission confirms that these exemptions were imputable to the Member State and granted through State resources.

5.1.3.2. Economic advantage and selectivity

(193) As already stated in recitals 182 to 189, the Commission considers, at first sight, that the partial CSPE exemption granted to self-generators conferred an advantage on them.

(194) The Commission next has to assess whether this advantage was selective for the own consumption of electricity self-generated from high-efficiency cogeneration and renewable energy.

(195) Firstly, the reference system has been described in recital 165. This reference system – the CSPE – was a charge paid by all electricity consumers, which pursued specific objectives.

(196) Secondly, with regard to the CSPE exemption for the own consumption of electricity generated by facilities using renewable energy or high-efficiency cogeneration, in respect of the part of the CSPE used to fund renewable energy and high-efficiency cogeneration, the Commission considers that beneficiaries of this allowance were in the same factual and legal situation as other CSPE contributors with regard to the objective pursued by the CSPE, which required all final consumers of electricity to contribute to the system in order to fund the CSPE objectives.

(197) The Commission observes that self-generators having made the choice to use renewable energy or high-efficiency cogeneration for their own electricity consumption directly contributed to the objectives of two measures funded by the CSPE, namely support for the generation of electricity from renewable energy and support for high-efficiency cogeneration facilities. However, France has confirmed that these self-generators did not benefit from support measures for the self-generated electricity. Only the electricity fed into the network could receive support funded via the CSPE. Given that the self-generation of electricity from renewable energy sources or high-efficiency cogeneration contributed in the same way as the electricity fed into the network to the environmental protection and energy efficiency objectives pursued by the support measures funded by the CSPE, the Commission therefore considers that it was consistent with the logic and nature of the CSPE to exempt self-generators using renewable energy or high-efficiency cogeneration for their own electricity consumption (and not benefiting from any support funded via the CSPE for that electricity) from the part of the CSPE intended to fund the support measures for renewable energy and cogeneration respectively (38). This exemption consequently did not constitute a selective advantage.

(198) While it is justified to exempt a self-generator using high-efficiency cogeneration from the part of the CSPE that funds support for cogeneration, this is not, however, justified in respect of the part of the CSPE that funds support for renewable energy, except where the cogeneration facility also uses renewable energy. Likewise, while it is justified to exempt a self-generator using renewable energy from the part of the CSPE that funds support for renewable energy, this is not justified in respect of the part of the CSPE that funds support for cogeneration, except where the facility is itself a high-efficiency cogeneration facility.

(199) In addition, it is not justified to exempt a self-generator using high-efficiency cogeneration or renewable energy from the part of the CSPE that funds the other objectives (particularly the social tariffs and tariff equalisation). With regard to the funding of these other objectives, self-generators using high-efficiency cogeneration or renewable energy are in a comparable factual and legal situation to other electricity consumers, given that their self-generation does not contribute to these other objectives.

(200) The Commission also observes that the CSPE exemptions granted to self-generating sites cannot be justified by an objective of common interest linked to improving peak demand management, as argued by France, because this objective of common interest was not an objective of the reference system, namely the CSPE. In addition, even if the CSPE did have this objective, the self-generation exemption would not as such have allowed demand peaks to be managed. Self-generators are always connected to the network, not only so that they can feed their production surplus into the network, but also so that they can take electricity from the network in the event of their facilities being faulty or undergoing maintenance, or, quite simply, to supplement their self-generating facility. But the exemption was not subject to the condition that electricity should not be taken from the network at times of peak demand.

(201) France has also maintained that the partial self-generation exemption was justified by the fact that self-generators have made a choice not to use the public electricity service. However, the Commission notes, first, that France has not shown that the CSPE was based on the level of use of the public electricity service. France has confirmed that all self-generators benefiting from the partial self-generation exemption were connected to the public network, so that they all had the option of using the network, if necessary, to feed their production surplus into the network or to take electricity from the network if their facility was faulty or undergoing maintenance. The Commission also notes that, with regard to the part of the CSPE that funded tariff equalisation with the overseas territories, self-generators and final consumers in mainland France were in the same situation, as neither benefited from this service, but both were required to fund it in a spirit of solidarity.

(202) Lastly, France has argued that the (partial) exemption was justified by Directive 2003/96/EC, which provides that small producers of electricity can be exempted from an electricity tax provided that the energy products used for the production of that electricity are taxed in another way (see recitals 76 and 111). The Commission notes in this respect that Directive 2003/96/EC is not applicable as such to the CSPE, which France did in fact acknowledge in its correspondence before the formal investigation procedure was opened. In addition, even if Directive 2003/96/EC were applicable, or its guiding principles should be applied to the CSPE by analogy, it must be concluded that the exemption was not justified. As the CSPE was levied only on electricity, it did not apply to energy products other than electricity used to produce that electricity. As a result, the application of Directive 2003/96/EC would in reality tend to confirm that the CSPE should have been levied on such electricity.

5.1.3.3. Impact on competition and trade between Member States

(203) The undertakings benefiting from these CSPE exemptions were in competition with undertakings from other Member States. The self-generators in question were not electricity producers, but industrial undertakings active mainly in chemicals, iron and steel and petrochemicals, as indicated by France and noted in recital 78. Consequently, these exemptions were likely to have an impact on competition and trade between Member States.

5.1.3.4. Conclusion on existence of aid

(204) The Commission concludes that the CSPE exemptions granted for the own consumption of electricity produced respectively from renewable energy sources and high-efficiency cogeneration and used to produce electricity did not constitute State aid as regards the parts of the CSPE that funded renewable energy and high-efficiency cogeneration. However, the exemption from the parts of the CSPE that funded objectives other than support for renewable energy and high-efficiency cogeneration did constitute State aid.

(205) The Commission therefore endorses the conclusions reached by France outlined in recitals 128 to 131.

5.1.4. Exemptions granted for self-generation from sources other than high-efficiency cogeneration and renewable energy

5.1.4.1. Aid imputable to a Member State and granted through State resources

(206) For the same reasons as those set out in Section 5.1.2.1, the Commission confirms that these exemptions were imputable to the Member State and granted through State resources.

5.1.4.2. Economic advantage and selectivity

(207) As already stated in recital 193, the Commission considers that the partial CSPE exemption granted to self-generators conferred an advantage on them.

(208) The Commission also considers that the exemptions granted to self-generators where their own consumption was not used (i) to produce electricity, or where the self-generated electricity consumed by the self-generator did not come from (ii) renewable energy or high-efficiency cogeneration, gave a selective advantage to their beneficiaries, compared with CSPE contributors who were, however, in the same factual situation as their competitors paying the CSPE.

(209) The reference system has been described in recital 165. The CSPE was a charge applied in principle to all electricity consumption in France which was intended to finance measures pursuing specific objectives.

(210) Where beneficiaries of the exemption were self-generators not using the own consumption to produce electricity, or where the self-generated electricity consumed by the self-generator did not come from renewable energy or high-efficiency cogeneration, these beneficiaries were in the same factual and legal situation as other consumers with regard to the objective of the CSPE. In particular, they consumed electricity and their self-generation did not contribute to any of the objectives of the measures funded by the CSPE.

(211) The Commission also observes that the CSPE exemptions granted to self-generating sites cannot be justified by an objective of common interest linked to improving peak demand management, as argued by France, because this objective of common interest was not an objective of the reference system, namely the CSPE. In addition, even if the CSPE did have this objective, the self-generation exemption would not as such have allowed demand peaks to be managed. Self-generators are always connected to the network, not only so that they can feed their production surplus into the network, but also so that they can take electricity from the network in the event of their facilities being faulty or undergoing maintenance, or, quite simply, to supplement their self-generating facility. But the exemption was not subject to the condition that electricity should not be taken from the network at times of peak demand.

(212) France has also maintained that the partial self-generation exemption was justified by the fact that self-generators have made a choice not to use the public electricity service. However, the Commission notes, first, that France has not shown that the CSPE was based on the level of use of the public electricity service. France has also confirmed that all self-generators benefiting from the partial self-generation exemption were connected to the public network, so that they all had the option of using the network, if necessary, to feed their production surplus into the network or to take electricity from the network if their facility was faulty or undergoing maintenance. The Commission also notes that the CSPE also aimed to fund tariff equalisation with the overseas territories. But as far as the objective of financing tariff equalisation is concerned, self-generators and final consumers in mainland France were in the same situation, as neither benefited from this service, but both were required to fund it in a spirit of solidarity. In addition, the self-generators in question did not contribute to the objectives of developing renewable energy or cogeneration either; indeed their production – by definition using fossil fuels and not cogeneration – even went against those objectives.

(213) France has also maintained that the partial exemption of self-generation, up to 240 GWh, was generally applicable. In this respect, the Commission notes first that France has confirmed that the exemption in fact applied only to certain sectors (see recitals 35 and 36). Secondly, the Court of Justice found, in its judgment of 21 December 2016 in Commission v World Duty Free Group (39), that a tax measure or charge is selective where it is established that it introduces, between operators that are, in the light of the objective pursued by the general tax system concerned, in a comparable factual and legal situation, a distinction that is not justified by the nature and general structure of that system. It has been shown in recitals 161 and 162 that the exemption did indeed introduce, between operators that were, in the light of the objective pursued by the general tax system concerned, in a comparable factual and legal situation, a distinction that was not justified by the nature and general structure of that system.

(214) The Commission consequently disagrees with the position adopted by France that is outlined in recitals 111 and 112.

5.1.4.3. Impact on competition and trade between Member States

(215) The undertakings benefiting from these CSPE exemptions were in competition with undertakings from other Member States. They were self-generators who were not electricity producers but industrial undertakings active mainly in chemicals, iron and steel and petrochemicals, as indicated by France and noted in recital 78. Consequently, these exemptions were likely to have an impact on competition and trade between Member States.

5.1.4.4. Conclusion on existence of aid

(216) The Commission concludes that the CSPE exemptions granted for the self-generation of electricity that was not used to produce electricity and that was generated from sources other than renewable energy and high-efficiency cogeneration constituted State aid.

5.1.5. General conclusion on the existence of aid as regards the various components of the CSPE and on the estimate of its amount

(217) The CSPE site cap and 0,5 % value added cap constituted State aid.

(218) The exemptions granted to self-generating sites constituted aid, except where the electricity was consumed by the self-generator in order to produce electricity or where the exemption applied to electricity self-generated from renewable energy or high-efficiency cogeneration, in respect of the part of the CSPE that funded renewable energy or high-efficiency cogeneration respectively.

5.2. Unlawfulness of the aid

(219) As the CSPE reductions were implemented before being notified to the Commission, the French authorities failed to meet their obligations under Article 108(3) TFEU.

(220) Consequently, the Commission concludes that the CSPE site cap and 0,5 % value added cap and the exemptions granted to self-generators that constituted State aid were unlawful.

5.3. Analysis of the aid measures based on the provisions of the Guidelines applicable to environmental tax reductions

(221) The Commission has examined first of all whether the CSPE could be regarded as an environmental tax within the meaning of Section 3.7.1 of the 2014 Guidelines, point 151 of the 2008 Guidelines and point 6 of the 2001 Guidelines.

5.3.1. The CSPE was not an environmental tax within the meaning of Section 3.7.1 of the 2014 Guidelines, point 151 of the 2008 Guidelines and point 6 of the 2001 Guidelines

(222) Environmental taxes within the meaning of the 2014 Guidelines (paragraph 167) are intended to increase the costs of environmentally harmful behaviour,