33.

The following section is inserted: ‘2.6. Aid for the decarbonisation of industrial production processes through electrification and/or the use of renewable and electricity-based hydrogen fulfilling certain conditions and for energy efficiency measures 53quater Beyond the existing possibilities available in accordance with Article 107(3)(c) TFEU, State aid to facilitate investments in the decarbonisation of industrial activities, notably through electrification and technologies using renewable and electricity-based hydrogen fulfilling the conditions of point 53quinquies (h), and in energy efficiency measures in industry forms part of an appropriate, necessary and targeted solution to reduce the dependency on imported fossil fuels in the context of Russian military aggression against Ukraine. In the light of the urgent need to accelerate that process for swift implementation of such investments certain simplifications are justified. 53quinquies The Commission will consider compatible with the internal market on the basis of Article 107(3)(c) TFEU the aid for investments leading to (i) a substantial reduction of greenhouse gas emissions from industrial activities currently relying on fossil fuels as energy source or feedstock, or (ii) a substantial reduction of energy consumption in industrial activities and processes, provided that all the following conditions are met: a. the aid is granted on the basis of a scheme with an estimated budget; b. the maximum individual aid amount that may be granted per undertaking must, in principle, not to exceed 10 % of the total budget available for such a scheme. With appropriate justification provided by the Member State to the Commission, the Commission may accept schemes that provide for the granting of individual aid amounts exceeding 10 % of the total budget available for the scheme; c. the aid is granted in the form of direct grants, repayable advances, loans, guarantees or tax advantages; d. the investment must enable the beneficiary to do one or both of the following: (i) reduce by at least 40 % compared to the situation before the aid, direct greenhouse gas emissions from its industrial installation currently relying on fossil fuels as energy source or feedstock, by means of the electrification of the production processes, or the use of renewable and electricity-based hydrogen fulfilling the conditions of point (h) below to substitute fossil fuels; for the purposes of verifying the reduction of greenhouse gas emissions, also actual emissions from the combustion of biomass is to be taken into account; (*) (ii) reduce by at least 20 % compared to the situation before the aid, energy consumption in industrial installations in relation to the aided activities; (**) e. regarding investments relating to activities covered by the Emission Trading System (ETS), the aid leads to a reduction in the beneficiary installation’s greenhouse gas emissions going below the relevant benchmarks for free allocation set out in Commission Implementing Regulation (EU) 2021/447 (***); f. the aid must not be used to finance an increase of the overall production capacity of the beneficiary; g. where the aid is granted for an industrial decarbonisation investment involving the use of renewable hydrogen, the Member State must ensure that the hydrogen used is produced from renewable energy sources in accordance with the methodologies set out for renewable liquid and gaseous transport fuels of non-biological origin in Directive (EU) 2018/2001; h. aid can also be granted for an industrial decarbonisation investment involving the use of hydrogen produced from electricity in one of the following instances: (i) the hydrogen is produced only in hours in which the marginal generation unit in the bidding zone where the electrolyser is located in the imbalance settlement periods when the electricity is consumed is a fossil-free electricity generation plant. Hydrogen produced in hours in which the marginal generation unit in the bidding zone where the electrolyser is located in the imbalance settlement periods when the electricity is consumed is a renewable electricity generation plant cannot be counted a second time under this section. (ii) alternatively, hydrogen is produced from electricity taken from the grid and the electrolyser is producing hydrogen for a number of full load hours equal or lower than the number of hours in which the marginal price of electricity in the bidding zone was set by installations producing fossil-free electricity other than renewable; (iii) alternatively, the Member State must ensure that the used electricity-based hydrogen achieves life-cycle greenhouse gas emissions savings of at least 70 % relative to a fossil fuel comparator of 94g CO2eq/MJ (2.256 tCO2eq/tH2) and that it originates from fossil-free sources. The method to compute the greenhouse gas emissions allocated to the electricity should not lead to an increased consumption of fossil fuel in line with REPowerEU objectives. Only the share of the produced hydrogen corresponding to the average share of electricity from fossil-free electricity generation plants other than renewable electricity generation plants, in the country of production, as measured two years before the year in question, can be used for the purpose of this section. i. the aid is granted by 30 June 2023 and is subject to the condition that the installation or equipment to be financed by the investment must be completed and be in full operation within 24 months after the date of granting or within 30 months after the date of granting for investments involving the use of renewable and hydrogen fulfilling the conditions of point (h). Where the deadline for completion and entry into operation is not met, 5 % of the amount of aid awarded must be reimbursed or reduced per month after the first three months of delay, increasing to 10 % per month of delay after the sixth month, unless the delay is due to factors outside the control of the aid beneficiary, and could not reasonably have been foreseen (****). Where the deadline for completion and entry into operation is respected, aid in the form of repayable advances may be transformed into grants; if not, the repayable advance is to be reimbursed in equal annual instalments within five years after the date of granting the aid; j. aid may be granted for investments for which works started as of 20 July 2022; for projects started before 20 July 2022, aid may be granted if it is necessary to significantly accelerate or widen the scope of the investment. In such cases, only the additional costs in relation to the acceleration efforts or the widened scope are eligible for aid; k. the aid must not be granted for merely complying with applicable Union standards (*****); l. the aid must induce the beneficiary to undertake an investment, which it would not undertake, or would carry out in a restricted or different manner, without the aid. The Commission considers that, given the exceptional economic challenges that undertakings face due to the current crisis, it is generally the case that in the absence of the aid, beneficiaries would continue their activities without changes, provided that continuing their activities without changes does not entail a breach of Union law; m. the eligible costs are the difference between the costs of the aided project and the cost savings or additional revenues, compared to the situation in the absence of the aid, over the lifetime of the investment; n. the aid intensity must not exceed 40 % of the eligible costs. The aid intensity may be increased by 10 percentage points for aid granted to medium sized undertakings and by 20 percentage points for aid granted to small undertakings. The aid intensity may also be increased by 15 percentage points for investments delivering a reduction of direct greenhouse gas emissions of at least 55 % or of energy consumption of at least 25 % compared to the situation prior to the investment (******); o. as an alternative to the requirements set out in points (m) and (n), the investment aid may be granted in a competitive bidding process that is open, clear, transparent and non-discriminatory, based on objective criteria that are defined ex–ante and minimising the risk of strategic bidding. At least 70 % in the total selection criteria used for ranking bids must be defined in terms of aid per unit of environmental protection (such as EUR per tonne of CO2 reduced, or EUR per unit of energy saved). The budget related to the bidding process must be a binding constraint in that it can be expected that not all bidders will receive aid; p. the scheme must be designed in a way that allows to address windfall profits, including in times of extremely high electricity or natural gas prices, by putting in place a claw-back mechanism defined ex ante; q. aid under this section must not be combined with other aid for the same eligible costs. (*) The reduction in direct greenhouse gas emissions must be measured by reference to average direct greenhouse gas emissions occurred over the five years preceding the aid application (average emission on an annual basis)." (**) The reduction of energy consumption must be measured by reference to energy consumption occurred over the five years preceding the aid application (average consumption on an annual basis)." (***) Commission Implementing Regulation (EU) 2021/447 of 12 March 2021 determining revised benchmark values for free allocation of emission allowances for the period from 2021 to 2025 pursuant to Article 10a(2) of Directive 2003/87/EC of the European Parliament and of the Council (OJ L 87, 15.3.2021, p. 29)." (****) These factors could for example include a mandatory confinement of population due to a pandemic, or worldwide disruptions in the supply chain of necessary equipment for the projects. However, it would not include delays in obtaining the required permits for the project." (*****) As defined in point 19(89) of the Communication from the Commission – Guidelines on State aid for climate, environmental protection and energy 2022 (OJ C 80, 18.2.2022, p. 1)." (******) The reduction in direct greenhouse gas emissions or energy consumption must be measured by reference to average direct greenhouse gas emissions or energy consumption occurred over the five years preceding the aid application (average emission/consumption on an annual basis).’"