COMMUNICATION FROM THE COMMISSION

Guidelines for State aid in the agricultural and forestry sectors and in rural areas

(2022/C 485/01)

Contents

PART I COMMON PROVISIONS 4

CHAPTER 1 Introduction 4

CHAPTER 2 Scope and definitions 4

2.1. Effect of the CAP on the scope of application 6

2.2. Scope of application 7

2.3. Horizontal rules and aid instruments applicable to the agricultural and forestry sectors and to rural areas 9

2.4. Definitions 10

CHAPTER 3 Compatibility assessment pursuant to Article 107(3), point (c), of the Treaty 15

3.1. First condition: aid facilitates the development of an economic activity 16

3.1.1. Aided economic activity 16

3.1.2. Incentive effect 17

3.1.3. No breach of relevant provisions and general principles of Union law 19

3.2. Second condition: aid does not unduly affect trading conditions to an extent contrary to the common interest 20

3.2.1. Need for State intervention 20

3.2.2. Appropriateness of aid 21

3.2.3. Proportionality of the aid 22

3.2.4. Transparency 25

3.2.5. Avoidance of adverse negative effects on competition and trade 26

3.2.6. Weighing up the positive and the negative effects of the aid (balancing test) 28

PART II CATEGORIES OF AID 30

CHAPTER 1 Aid in favour of undertakings active in the primary production, processing and marketing of agricultural products 30

1.1. Rural development-like measures 30

1.1.1. Aid for investment 30

1.1.1.1. Aid for investments in agricultural holdings linked to primary agricultural production 30

1.1.1.2. Aid for investments in favour of the conservation of cultural and natural heritage located on agricultural holdings 34

1.1.1.3. Aid for investments in connection with the processing of agricultural products or the marketing of agricultural products 35

1.1.2. Start-up aid for young farmers and start-up aid of agricultural activities 36

1.1.3. Start-up aid for producer groups and organisations in the agricultural sector 36

1.1.4. Aid for agri-environment-climate commitments 38

1.1.5. Aid for animal welfare commitments 40

1.1.6. Aid for area-specific disadvantages resulting from certain mandatory requirements 42

1.1.7. Aid to areas facing natural or other area-specific constraints 43

1.1.8. Aid for organic farming 43

1.1.9. Aid for the participation of producers of agricultural products in quality schemes 45

1.1.10. Aid for provision of technical support in the agricultural sector 46

1.1.10.1. Aid for knowledge exchange and information actions 46

1.1.10.2. Aid for advisory services 47

1.1.10.3. Aid for farm replacement services 49

1.1.11. Aid for cooperation in the agricultural sector 49

1.2. Risk and crisis management 51

1.2.1. Aid to compensate for the damage to agricultural production or the means of agricultural production and to prevent damage 51

1.2.1.1. Aid to make good the damage caused by natural disasters or exceptional occurrences 51

1.2.1.2. Aid to compensate for damage caused by adverse climatic event which can be assimilated to a natural disaster 54

1.2.1.3. Aid for the costs of the prevention, control and eradication of animal diseases, plant pests and infestation by invasive alien species and aid to make good the damage caused by animal diseases, plant pests and invasive alien species 56

1.2.1.4. Aid for fallen stock 58

1.2.1.5. Aid to compensate for the damage caused by protected animals 59

1.2.1.6. Aid for the payment of insurance premiums 61

1.2.1.7. Aid for financial contributions to mutual funds 61

1.3. Other types of aid in the agricultural sector 62

1.3.1. Aid for closing production capacity 62

1.3.1.1. Closing of capacity for animal, plant or human health, sanitary, ethical, environmental or climate reasons 62

1.3.1.2. Closing of capacity for other reasons 64

1.3.2. Aid for the relocation of farming activities 64

1.3.3. Aid to the livestock sector 65

1.3.4. Aid for promotion measures in favour of agricultural products 66

1.3.5. Aid for the outermost regions and the smaller Aegean islands 69

1.3.6. Aid for agricultural land consolidation 70

1.3.7. Aid for research and development in the agricultural sector 70

CHAPTER 2 Aid for the forestry sector 71

2.1. Investments in forest area development and improvement of the viability of forests 72

2.1.1. Aid for afforestation and creation of woodland 72

2.1.2. Aid for the establishment, regeneration or renovation of agro-forestry systems 74

2.1.3. Aid for the prevention and restoration of damage to forests 74

2.1.4. Aid for investments improving the resilience and environmental value of forest ecosystems 75

2.1.5. Aid for investments in forestry technologies and in processing, mobilising and marketing of forest products 76

2.1.6. Aid for investments in infrastructure related to the development, modernisation or adaptation of forestry 76

2.1.7. Aid for investments in favour of the conservation of cultural and natural heritage located in forests 76

2.1.8. Aid for financial contributions to mutual funds in forestry 77

2.2. Aid for area-specific disadvantages resulting from certain mandatory requirements in forest areas 78

2.3. Aid for forest-environment and climate services and forest conservation 78

2.4. Aid for knowledge exchange and information actions in the forestry sector 79

2.5. Aid for advisory services in the forestry sector 80

2.6. Aid for cooperation in the forestry sector 80

2.7. Start-up aid for producer groups and organisations in the forestry sector 82

2.8. Other aid to the forestry sector with ecological, protective and recreational objectives 83

2.8.1. Aid for specific forest actions and interventions with the primary objective to contribute to maintaining or to restoring forest ecosystem and biodiversity or the traditional landscape 83

2.8.2. Aid for maintaining and improving the soil quality and ensuring a balanced and healthy tree growth in the forestry sector 83

2.8.3. Restoration and maintenance of natural pathways, landscape elements and features and natural habitat for animals in the forestry sector 84

2.8.4. Aid for maintaining roads to prevent forest fires 84

2.8.5. Aid to make good the damage in forests caused by protected animals 84

2.9. Aid in the forestry sector aligned with the agricultural aid measures 85

2.9.1. Aid for research and development in the forestry sector 85

2.9.2. Aid for forestry land consolidation 87

CHAPTER 3 Aid in rural areas which is co-financed by the EAFRD or granted as additional national financing to such co-financed interventions 87

PART III PROCEDURAL MATTERS 87

1. Duration of aid schemes and evaluation 88

2. Revision clause 89

3. Reporting and monitoring 89

4. Application of the Guidelines 90

5. Proposals for appropriate measures 90

PART I

COMMON PROVISIONS

CHAPTER 1

Introduction

(1) Article 107(1) of the Treaty on the Functioning of the European Union (‘the Treaty’) states that, ‘(s)ave as otherwise provided in the Treaties, 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 internal market.’ Although the Treaty lays down the principle that State aid is prohibited, in certain cases, such aid may be compatible with the internal market on the basis of Article 107(2) and (3) of the Treaty.

(2) In accordance with Article 107(2), point (b), of the Treaty, State aid to make good the damage caused by natural disasters or exceptional occurrences within the agricultural and forestry sectors is compatible with the internal market.

(3) In accordance with Article 107(3), point (c), of the Treaty, the Commission may consider State aid to promote the economic development of the agricultural and forestry sectors and of rural areas compatible with the internal market, provided that it does not adversely affect trading conditions to an extent contrary to the common interest.

(4) In accordance with Article 42 of the Treaty, the rules on competition, which include those on State aid, apply to production of and trade in agricultural products only to the extent determined by the European Parliament and the Council, account being taken of the objectives of the common agricultural policy set out in Article 39 of the Treaty.

(5) In these Guidelines, the Commission establishes the criteria for identifying the aid that fulfils the conditions of Article 107(3) of the Treaty and can be considered compatible with the internal market. As regards aid granted pursuant to Article 107(2), point (b), of the Treaty, these Guidelines set out the conditions under which a measure constituting aid to make good the damage caused by natural disasters or exceptional occurrences is compatible with the internal market.

(6) State aid to promote the economic development of the agricultural and forestry sectors and of rural areas is embedded in the broader common agricultural policy (‘the CAP’). Within the CAP, the Union provides financial support to the agricultural and forestry sectors and to rural areas. As the economic effects of State aid do not change depending on whether it is (even partly) financed by the Union, or by a Member State alone, the Commission considers that there should be consistency and coherence between its policy in respect of the control of State aid and the support which is granted under the Union’s own common agricultural policy. Therefore, when the Commission applies and interprets the rules in these Guidelines for specific aid schemes and individual aid, it takes into consideration the CAP rules.

(7) The following Union acts are of particular relevance for State aid considerations related to the CAP: (a) Regulation (EU) 1144/2014 of the European Parliament and of the Council (1); (b) Regulations (EU) No 228/2013 (2) and (EU) No 229/2013 (3) of the European Parliament and of the Council; (c) Regulation (EU) 2021/2115 of the European Parliament and of the Council (4); (d) Regulation (EU) 2021/2116 of the European Parliament and of the Council (5); (e) Regulation (EU) No 1308/2013 of the European Parliament and of the Council (6).

(8) The CAP is based on two pillars (the European Agricultural Guarantee Fund (‘EAGF’) and the European Agricultural Fund for Rural Development (‘EAFRD’)), which, combined, provide a fundamental layer of support to farmers and rural areas in the Union, creating the conditions to maintain sustainable farming in place throughout the Union.

(9) In accordance with Article 39(1) of the Treaty, the objectives of the CAP are to increase agricultural productivity, to ensure a fair standard of living for the agricultural community, to stabilise markets, to assure the availability of supplies and to ensure that supplies reach the consumer at reasonable prices. In accordance with Article 39(2) of the Treaty, in working out the CAP and the special methods for its application, account must be taken of: (a) the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions; (b) the need to effect the appropriate adjustments by degrees; (c) the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole.

(10) With the aim of further improving the sustainable development of farming, food and rural areas, the post 2020 CAP objectives focus on fostering a smart, competitive, resilient and diversified agricultural sector ensuring long-term food security, on supporting and strengthening environmental protection and climate action, on contributing to achieving the environmental and climate-related objectives of the Union and on strengthening the socio-economic fabric of rural areas. Those general objectives are complemented by the cross-cutting objective of modernising the sector by the fostering and sharing of knowledge, innovation and digitalisation in agriculture, forestry and rural areas, and encouraging their uptake. The achievement of the general CAP objectives is pursued through the following specific objectives: (a) supporting viable farm income and resilience of the agricultural sector across the Union to enhance long-term food security and agricultural diversity as well as ensuring the economic sustainability of agricultural production in the Union; (b) enhancing market orientation and increase farm competitiveness both in the short and long term, including greater focus on research, technology and digitalisation; (c) improving farmers’ position in the value chain; (d) contributing to climate change mitigation and adaptation, including by reducing greenhouse gas emissions and enhancing carbon sequestration, as well as promoting sustainable energy; (e) fostering sustainable development and efficient management of natural resources such as water, soil and air, including by reducing chemical dependency; (f) contributing to halting and reversing biodiversity loss, enhancing ecosystem services and preserving habitats and landscapes; (g) attracting and sustaining young farmers and other new farmers and facilitating sustainable business development in rural areas; (h) promoting employment, growth, gender equality, including the participation of women in farming, social inclusion and local development in rural areas, including circular bio economy and sustainable forestry; (i) improving the response of Union agriculture to societal demands on food and health, including high quality, safe, and nutritious food produced in a sustainable way and the reduction of food waste, as well as improving animal welfare and combatting antimicrobial resistances.

CHAPTER 2

Scope and definitions

2.1. Effect of the CAP on the scope of application

(11) In accordance with Article 42 of the Treaty, in so far as agricultural products listed in Annex I to the Treaty are concerned, the rules on State aid laid down in Articles 107, 108 and 109 of the Treaty apply only to the extent determined by the European Parliament and the Council, account being taken of the objectives of the common agricultural policy set out in Article 39 of the Treaty.

(12) Pursuant to Article 145(1) of Regulation (EU) 2021/2115 and Article 211(1) of Regulation (EU) No 1308/2013, the rules on State aid are applicable to the production of and trade in agricultural products. However, there are various derogations from this general principle which are laid down, amongst others, in Article 23 of Regulation (EU) No 228/2013, Article 17 of Regulation (EU) No 229/2013, Article 145(2) of Regulation (EU) 2021/2115, Article 211(2) of Regulation (EU) No 1308/2013 and Article 27 of Regulation (EU) No 1144/2014.

(13) As regards support granted under Regulation (EU) 2021/2115, Article 145(2) of that Regulation stipulates that the State aid rules do not apply to support provided by Member States pursuant to, and in conformity with that Regulation or to additional national financing within the scope of Article 42 of the Treaty.

(14) Therefore, State aid rules do not apply to the co-financing of rural development support (both the EAFRD part and the national part) or to additional national financing on top of such support, provided that the intervention in question is related to an agricultural activity falling within the scope of Article 42 of the Treaty and forms a part of a CAP Strategic Plan.

(15) However, State aid rules apply fully to all co-financed interventions (both the EAFRD part and the national part) and to the additional national financing for such interventions, which fall outside the scope of Article 42 of the Treaty, but fall within the scope of Regulation (EU) 2021/2115, that is to say, in the following cases: (a) interventions supporting activities in the rural areas and (b) interventions in the forestry sector.

(16) State aid rules apply if a Member State intends to finance a measure which is designed largely in accordance with the conditions of a given rural development intervention (‘rural development-like measure’) exclusively from national funds (that is to say, without any EAFRD co-financing), regardless of whether the measure falls within or outside the scope of Article 42 of the Treaty.

2.2. Scope of application

(17) The Commission will apply these Guidelines to aid schemes and individual aid.

(18) The Commission will apply these Guidelines to State aid for the primary agricultural production, the processing of agricultural products resulting in another agricultural product and the marketing of agricultural products.

(19) Based on the general considerations set out in Section 2.1 of this Part, in order to ensure coherence with the rural development policy and to support compliance with State aid rules, it is appropriate to also include certain rural development interventions falling outside the scope of Article 42 of the Treaty, whether co-financed by the EAFRD or additional national financing, as well as rural development-like measures financed exclusively from national funds. Therefore, in addition to the agricultural sector, these Guidelines set out the compatibility criteria for State aid to the forestry sector and aid to undertakings active in rural areas which fall outside the scope of Article 42 of the Treaty.

(20) When analysing State aid and its compatibility with the internal market in line with the general principles on State aid set out in Part I, Chapter 3, of these Guidelines, the Commission will take into account, to the extent possible, the conditions laid down in Regulation (EU) 2021/2115 and its delegated and implementing acts.

(21) The following categories of aid fall within the scope of these Guidelines: (a) measures in the agricultural sector, financed exclusively from national funds, which consist of one of the following: (i) rural development-like measures falling outside the framework of the CAP Strategic Plans (Part II, Section 1.1); (ii) measures other than those referred to in (i) which fall outside the scope of Regulation (EU) 2021/2115, such as certain risk and crisis management measures, aid for the livestock sector and certain promotion measures (Part II, Sections 1.2 and 1.3); (b) aid for the forestry sector (Part II, Chapter 2), which consists of one of the following: (i) granted as part of a CAP Strategic Plan or as additional national financing for such rural development intervention; (ii) financed exclusively from national resources; (c) aid for undertakings active in rural areas which is granted in one of the following forms: (i) an intervention included in a CAP Strategic Plan, co-financed by the EAFRD pursuant to, and in conformity with Regulation (EU) 2021/2115, where the notifiable State aid measure is identical with the intervention in a CAP Strategic Plan (Part II, Chapter 3); (ii) additional national financing related to an intervention in the framework of a CAP Strategic Plan (Part II, Chapter 3).

(22) These Guidelines apply to aid to small and medium-sized enterprises (SMEs) and in principle also to large enterprises. However, large enterprises tend to be less affected by market failures than SMEs. Moreover, large enterprises in the agricultural and forestry sectors and in rural areas are more likely to be significant players on the market and, consequently, in specific cases, aid granted to large enterprises may particularly distort competition and trade in the internal market. As aid to large enterprises in the agricultural and forestry sectors and in rural areas and to other large enterprises can potentially cause similar distortions of competition, State aid rules for large enterprises in these Guidelines are harmonised with the general State aid rules, and are subject to the compatibility assessment pursuant to Article 107(3), point (c), of the Treaty as described in Chapter 3 of this Part. As regards aid measures for the livestock sector pursuant to Part II, Section 1.3.1. of these Guidelines , which do not fall within the scope of Regulation (EU) 2021/2115, the Commission maintains its previous policy that large enterprises should be able to finance the costs of these measures themselves. Therefore, aid in the livestock sector should remain limited to SMEs.

(23) Undertakings in difficulty are excluded from the scope of these Guidelines, subject to the exceptions set out in this point. The Commission considers that when an undertaking is in financial difficulty, given that its very existence is in danger, it cannot be considered an appropriate vehicle for promoting other public policy objectives until such time as its viability is assured. Therefore, where the beneficiary of the aid is undertaking in difficulty as defined in point (33)63, the aid will be assessed in accordance with the Guidelines on State aid for rescuing and restructuring firms in difficulty ( 7 ) . However, the principle of not providing State aid to undertakings in financial difficulties does not apply to compensatory aid for damage caused by natural disasters and exceptional occurrences referred to in Part II, Sections 1.2.1.1 and 2.1.3, provided the aid is compatible with the internal market under Article 107(2), point (b), of the Treaty. If the financial difficulties of an undertaking active in the agricultural and forestry sectors has been caused by a risk event referred to in Part II, Sections 1.2.1.2, 1.2.1.3, 1.2.1.5, 2.1.3, 2.8.1 or 2.8.5, aid to compensate for the losses or damage caused by such risk events and to cover the costs of eradication of plant pests can be granted in accordance with these Guidelines as compatible with the internal market under Article 107(3), point (c), of the Treaty. In addition, for reasons of protection of public health and due to the emergency situation related to these types of aid, the economic situation of an undertaking should not be taken into consideration as regards aid for the destruction and removal of fallen stock, as set out in Part II, Section 1.2.1.4, and for aid for prevention, control and eradication measures in the case of animal diseases and plant pest referred to in points ((370)) and ((371)) in Part II, Section 1.2.1.3. Furthermore, this principle does not apply to information actions referred to in Part II, Sections 1.1.10.1 and 2.4, nor to promotion measures which are generic in character, as set out in Part II, Section 1.3.4.

(24) Aid in favour of agricultural products within the meaning of Annex 1 to the WTO Agreement on Agriculture, which constitutes an export subsidy as defined by that Agreement is excluded from the scope of these Guidelines. Likewise, aid in favour of such products, which constitutes export financing support provided by a government or any public body within the scope of the WTO Ministerial Decision on Export Competition of 19 December 2015 ( 8 ) is excluded from the scope of these Guidelines, if it does not comply with the relevant requirements of paragraph 15 of that Decision on maximum repayment term and self-financing.

(25) When assessing aid granted to an undertaking which is subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the internal market, the Commission will take account the amount of aid still to be recovered ( 9 ) . This does not apply to aid to make good the damage caused by natural disasters and exceptional occurrences under Article 107(2), point (b), of the Treaty and to aid for the costs of prevention, control and eradication of animal diseases referred to in points (370) and (371) in Part II, Section 1.2.1.3.

(26) Member States are reminded that the system of financing, for example, by parafiscal levies, should be notified, when the system forms an integral part of the aid measure ( 10 )

(27) The Commission will assess any aid measures not covered by these Guidelines or by any other relevant State aid rules on a case-by-case basis directly on the basis of Article 107(2), point (b), and Article 107(3) of the Treaty, taking into account the rules laid down in Articles 107, 108 and 109 of the Treaty, the CAP and by analogy these Guidelines, where possible. Member States notifying State aid not covered by these Guidelines will have to demonstrate that the State aid in question is compatible with Article 107(3), point (c), of the Treaty as set out in Chapter 3 of this Part of these Guidelines. The Commission will only approve such measures if the positive contribution to the development of the sector clearly outweighs the risks of distorting competition in the internal market and the effect on trade between Member States.

(28) For aid to be granted in Northern Ireland, where a measure requires compliance with conditions laid down in Regulation (EU) 2021/2115, equivalent information must be provided in the notification to the Commission pursuant to Article 108(3) of the Treaty.

2.3. Horizontal rules and aid instruments applicable to the agricultural and forestry sectors and to rural areas

(30) The horizontal instruments referred to in point (29) apply to the production, processing and marketing of agricultural products unless these Guidelines provide specific rules. These Guidelines provide specific rules relating to environmental aid measures, such as aid for agri-environment-climate and animal welfare commitments (Part II, Sections 1.1.4 and 1.1.5), aid for area-specific disadvantages resulting from certain mandatory requirements (Part II, Section 1.1.6) and aid for organic farming (Part II, Section 1.1.8). Aid for investments to pursue environmental objectives in the field of primary agricultural production is evaluated in accordance with the rules set out in Part II, Section 1.1.1.1. Aid for environmental protection in favour of undertakings active in the processing of agricultural products and the marketing of agricultural products can be considered compatible with the internal market under Article 107(3), point (c), of the Treaty if it fulfils the conditions of the Guidelines on State aid for climate, environmental protection and energy 2022. Aid for investments in energy efficiency, biofuel and energy from renewable sources are excluded from the scope of Part II, Chapters 2 and 3, as such aid should comply with the Guidelines on State aid for climate, environmental protection and energy 2022, unless it is exempted from the notification obligation. However, aid for investments linked to primary agricultural production related to the production of energy from renewable sources or to the production of biofuels on holdings can fall within the scope of these Guidelines, provided that such production does not exceed the average annual consumption of fuels or energy of the agricultural holding in question (Part II, Section 1.1.1.1).

(31) The Guidelines on regional State aid ( 19 ) do not apply to aid for the production of primary agricultural products due to the specificities of the sector. They do, however, apply to the processing of agricultural products and to the marketing of agricultural products to the extent set out in these Guidelines.

(32) Both the general State aid rules and the more specific provisions of these Guidelines may concern undertakings active in the forestry sector or in rural areas. Where applicable, aid to undertakings active in the forestry sector or in rural areas may also be found compatible under the conditions and in compliance with general Union rules on State aid (in particular, the Guidelines on regional State aid, the Framework for State aid for research and development and innovation and the Guidelines on State aid for climate, environmental protection and energy 2022).

2.4. Definitions

(33) For the purposes of these Guidelines: (1) ‘active farmer’ means a farmer as determined by a Member State in its CAP Strategic Plan (20) in accordance with Article 4(5) of Regulation (EU) 2021/2115; (2) ‘ad hoc aid’ means aid not granted on the basis of an aid scheme; (3) ‘adverse climatic event which can be assimilated to a natural disaster’ means unfavourable weather conditions such as frost, storms and hail, ice, heavy or persistent rain or severe drought which destroy, in the case of agriculture, more than 30 % of the average production calculated on the basis of the preceding three-year or four-year period or a three-year average based on the preceding five- or eight-year period, excluding the highest and the lowest entry; in the case of forestry, more than 20 % of the forestry potential; (4) ‘advice’ means complete advice given in the framework of one and the same contract; (5) ‘agricultural activity’ means an activity as determined by a Member State in its CAP Strategic Plan in accordance with Article 4(2) of Regulation (EU) 2021/2115; (6) ‘agricultural area’ means any area as determined by a Member State in its CAP Strategic Plan in accordance with Article 4(3) of Regulation (EU) 2021/2115; (7) ‘agricultural holding’ means a unit comprising of land, premises and facilities used for primary agricultural production; (8) ‘agricultural product’ means the products listed in Annex I to the Treaty, except fishery and aquaculture products listed in Annex I to Regulation (EU) No 1379/2013 of the European Parliament and of the Council (21); (9) ‘agricultural sector’ means all undertakings active in primary agricultural production, processing and marketing of agricultural products; (10) ‘agroforestry systems’ means land use systems in which trees are grown in combination with agriculture on the same land; (11) ‘aid’ means any measure fulfilling all the criteria laid down in Article 107(1) of the Treaty; (12) ‘aid intensity’ means the gross aid amount expressed as a percentage of the eligible costs, before any deduction of tax or other charge; (13) ‘aid scheme’ means any act on the basis of which, without further implementing measures being required, individual aid awards may be made to undertakings defined within the act in a general and abstract manner and any act on the basis of which aid which is not linked to a specific project may be granted to one or several undertakings for an indefinite period of time and/or for an indefinite amount; (14) ‘arm’s length’ means that the conditions of the transaction between the contracting parties do not differ from those which would be stipulated between independent undertakings and contain no element of collusion; any transaction that results from an open, transparent and unconditional procedure is considered as meeting the arm's length principle; (15) ‘biosecurity measures’ means management and physical measures designed to reduce the risk of introduction, development and spread of diseases to, from and within: (a) an animal population, or (b) an establishment, zone, compartment, means of transport or any other facilities, premises or location; (16) ‘breeding book’ means breading book as provided for in Article 2, point (12), of Regulation (EU) 2016/1012 of the European Parliament and of the Council (22); (17) ‘CAP Strategic Plan’ means CAP Strategic Plan as referred to in Article 1(1), point (c) of Regulation (EU) 2021/2115; (18) ‘capitalised works’ means works, undertaken by a farmer personally or by the farmer’s workers on the farm that create an asset; (19) ‘carbon farming schemes’ means aid schemes related to land management practices resulting in the increase of carbon storage in living biomass, dead organic matter and soils by enhancing carbon capture and/or reducing the release of carbon to the atmosphere; (20) ‘catastrophic event’ means an unforeseen event of biotic or abiotic nature caused by human action that leads to important disturbances in forest structures, eventually causing important economic damage to the forest sectors; (21) ‘cluster’ means a grouping of independent undertakings, including start-ups, small, medium and large enterprises as well as advisory bodies or research organisations designed to stimulate economic/ innovative activity by promoting intensive interactions, the sharing of facilities and the exchange of knowledge and expertise, as well as contributing effectively to knowledge transfer, networking and information dissemination among the undertakings in the cluster; (22) ‘control and eradication measures’ means measures regarding animal diseases for which a competent authority of a Member State has formally recognised an outbreak, or regarding plant pests or invasive alien species for which a competent authority of a Member State has formally acknowledged their presence; (23) ‘date of granting the aid’ means the date when the legal right to receive the aid is conferred on the beneficiary under the applicable national legal regime; (24) ‘environmental incident’ means a specific occurrence of pollution, contamination or degradation in the quality of the environment which is related to a specific event and is of limited geographical scope, which destroys more than 30 % of the average annual production of the undertaking active in the agricultural sector in the preceding three-year period or a three-year average based on the preceding five-year period, excluding the highest and lowest entry; in the case of forestry, more than 20 % of the forestry potential; it does not cover general environmental risks not connected with a specific event, such as climate change or atmospheric pollution; (25) ‘evaluation plan’ means a document covering one or more aid schemes and containing at least the following aspects: the objectives to be evaluated, the evaluation questions, the result indicators, the envisaged method to conduct the evaluation, the data collection requirements, the proposed timing of the evaluation including the date of submission of the interim and the final evaluation reports, the description of the independent body that will carry out the evaluation or the criteria that will be used for its selection and the modalities for making the evaluation publicly available; (26) ‘fallen stock’ means animals which have been killed by euthanasia with or without a definite diagnosis or which have died, including stillborn and unborn animals, on a farm or on any premises or during transport, but which have not been slaughtered for human consumption; (27) ‘fast growing trees’ means a short rotation forest, where the minimum time before felling is set to be not less than 8 years and the maximum time before felling is set not to exceed 20 years; (28) ‘fiscal successor scheme’ means a scheme in the form of tax advantages which constitutes an amended version of a previously existing scheme in the form of tax advantages and which replaces it; (29) ‘food and feed crop based biofuel’ means a biofuel produced from food and feed crops as defined in Directive (EU) 2018/2001 of the European Parliament and of the Council (23); (30) ‘foodstuffs’ means foodstuffs which are not agricultural products and which are listed in Annex I to Regulation (EU) No 1151/2012 of the European Parliament and of the Council (24); (31) ‘forest’ means an area of land spanning more than 0,5 hectares with trees higher than 5 meters and a canopy cover of more than 10 %, or trees able to reach these thresholds in situ and not including land that is predominantly under agricultural or urban land use, or a forest as defined and applied by a Member State or region based on existing national legislation or inventory system and as provided to the Commission in the notification; and, when it relates to a rural development intervention, as provided in the CAP Strategic Plan; (32) ‘gross grant equivalent’ means the amount of the aid if it had been provided in the form of a grant to the beneficiary, before any deduction of tax or other charges; (33) ‘individual aid’ means ad hoc aid and awards of aid to individual beneficiaries on the basis of an aid scheme; (34) ‘intangible assets’ means assets that do not have a physical or financial embodiment such as patents, licences, know-how or other intellectual property; (35) ’invasive alien species’ means invasive alien species of Union concern and invasive alien species of Member State concern as defined in Article 3(3) and 3(4) of Regulation (EU) No 1143/2014 of the European Parliament and of the Council (25); (36) ‘large enterprises’ means undertakings not fulfilling the criteria laid down in Annex I to Commission Regulation (EU) 2022/2472 (26); (37) ‘local markets’ means one of the following: (a) markets in a radius of 75 km from the farm of origin of the product, within which the activities of processing and sale to the final consumer have to take place; (b) markets for which the Member States set out a convincing alternative definition, not exceeding a radius of 100 km; (38) ‘marketing of agricultural products’ means holding or displaying with a view to sale, offering for sale, delivery or any other manner of placing on the market, except the first sale by a farmer to resellers or processors and any activity preparing a product for such first sale; a sale by a primary producer to final consumers is considered as marketing of agricultural products if it takes place in separate premises or facilities reserved for that purpose; (39) ‘mutual fund’ means a scheme accredited by a Member State in accordance with its national law for affiliated farmers, forest holders and forest managers to insure themselves, whereby compensation payments are made to affiliated farmers, forest holders and forest managers who experience economic losses; (40) ‘non-productive investment’ means an investment which does not lead to a significant increase in the value or profitability of the holding; (41) ‘operations prior to industrial processing’ means felling, dismembering, stripping, cutting up, storage, protective treatment and drying of wood and all other working operations prior to the industrial sawing of wood at a sawing mill; as well as sawmilling where the maximum sawmilling capacity is 20 000 m3 roundwood input for sawmilling per year; (42) ‘other adverse climatic event’ means unfavourable weather conditions which do not constitute an adverse climatic event which can be assimilated to a natural disaster; (43) ‘outermost regions’ means the regions referred to in Article 349, first paragraph, of the Treaty; (44) ‘plant pest’ means any species, strain or biotype of plant, animal or pathogenic agent injurious to plants or plant products; (45) ‘prevention measures’ means measures regarding an animal disease, plant pest or invasive alien species that has not yet occurred; (46) ‘primary agricultural production’ means the production of products of the soil and of stock farming, listed in Annex I to the Treaty, without performing any further operation changing the nature of such products; (47) ‘processing of agricultural products’ means any operation on an agricultural product resulting in a product which is also an agricultural product, except on-farm activities necessary for preparing an animal or plant product for first sale; (48) ‘producer group or organisation’ means a group or organisation set up for the purpose of at least one of the following: (a) adapting the production and output of producers who are members of the group or organisation to market requirements; (b) jointly placing goods on the market, including preparation for sale, centralisation of sales and supply to bulk buyers; (c) establishing common rules on production information, with particular regard to harvesting and availability; (d) other activities that may be carried out by producer groups or organisations, such as the development of business and marketing skills, the organisation and facilitation of innovation processes, joint management of the members’ land, and the use of environmentally sound cultivation practices and production techniques and sound animal welfare practices and techniques; (49) ‘protected animal’ means any animal protected either by Union or by national legislation, including animal species for which national legislation provides specific rules to preserve the population; (50) ‘repayable advance’ means a loan for a project which is paid in one or more instalments and the conditions for the reimbursement of which depend on the outcome of the project; (51) ‘research and knowledge-dissemination organisation’ means an entity (such as universities or research institutes, technology-transfer agencies, innovation intermediaries, research-oriented physical and/or virtual collaborative entities), irrespective of its legal status or way of financing, whose primary goal is to independently conduct fundamental research, industrial research or experimental development, as defined in the Framework for State aid for research and development and innovation, or to widely disseminate the results of such activities by way of teaching, publication or knowledge transfer; where such entity also pursues economic activities, the financing, the costs and the revenues of economic activities must be accounted for separately. Undertakings that can exert a decisive influence upon such an entity, for example in the quality of, for example, shareholders or members, may not enjoy a preferential access to the results generated by it; (52) ‘short supply chain’ means a supply chain involving a limited number of economic operators, committed to cooperation, local economic development, and close geographical and social relations between producers, processors and consumers; (53) ‘small-scale infrastructure’ means infrastructure with eligible costs limited to EUR 2 million; (54) ‘small operator’ means a microenterprise as defined in Commission Recommendation 2003/361 (27), or a natural person not engaged in economic activity at the moment of applying for aid; (55) ‘smaller Aegean islands’ means the smaller islands referred to in Article 1(2) of Regulation (EU) No 229/2013; (56) ‘SMEs’ or ‘micro, small and medium-sized enterprises’ means undertakings fulfilling the criteria laid down in Annex I to Commission Regulation (EU) 2022/2472; (57) ‘start of works on the project or activity’ means the earlier of, either the start of the activities, or the construction works relating to the investment, or the first legally binding commitment to order equipment or employ services or any other commitment that makes the project or activity irreversible; buying land and preparatory works such as obtaining permits and conducting feasibility studies are not considered start of works or activity; the purchase of land referred to in point (153)(a) and point (502)(c) where the eligible costs for the land purchase equals 100 % of the eligible investment costs, is considered to be the start of works on a project or an activity; (58) ‘sustainable forest management’ means the stewardship and use of forest lands in a way and at a rate that maintains their biodiversity, productivity, regeneration capacity, vitality and their potential to fulfil now and in the future relevant ecological, economic and social functions at local, national and global levels and that does not cause damage to other ecosystems; (59) ‘tangible assets’ means assets consisting of land, buildings and plant, machinery and equipment; (60) ‘transaction cost’ means an additional cost linked to fulfilling a commitment, but not directly attributable to its implementation or not included in the costs or income foregone that are compensated directly, and which can be calculated on a standard cost basis; (61) ‘Transmissible Spongiform Encephalopathy (TSE) and Bovine Spongiform Encephalopathy (BSE) test costs’ means all costs, including those for test kits and for the taking, transporting, testing, storing and destruction of samples, necessary for sampling and laboratory testing in accordance with Chapter C of Annex X to Regulation (EC) No 999/2001 of the European Parliament and of the Council (28); (62) ‘trees for short rotation coppicing’ means tree species of CN code 06 02 9041 to be defined by Member States that consist of woody, perennial crops, the rootstock or stools of which remain in the ground after harvesting, with new shoots emerging in the following season and with a maximum harvest cycle to be determined by the Member States; (63) ‘undertaking in difficulty’ means an undertaking fulfilling the criteria laid down in Section 2.2 of the Commission Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty; (64) ‘Union standard’ means a mandatory standard laid down in Union legislation setting the level which individual undertakings must achieve, in particular as regards the environment, hygiene and animal welfare; consequently, standards or targets set at Union level which are binding for Member States but not for individual undertakings are not deemed to be Union standards; (65) ‘young farmer’ means a farmer as determined by a Member State in its CAP Strategic Plan in accordance with Article 4(6) of Regulation (EU) 2021/2115; (66) for the purposes of conservation of genetic resources in agriculture and in forestry: (a) ‘in situ conservation’ in agriculture means the conservation of genetic material in ecosystems and natural habitats and the maintenance and recovery of viable population of species or feral breeds in their natural surroundings and, in the case of domesticated animal breeds or cultivated plant species, in the farmed environment where they have developed their distinctive properties; (b) ‘in situ conservation’ in forestry means the conservation of genetic material in ecosystems and natural habitats and the maintenance and recovery of viable population of species in their natural surroundings; (c) ‘on-farm or on-forest holding conservation’ means in situ conservation and development at farm or forest holding level; (d) ‘ex situ conservation’ means the conservation of genetic material for agriculture or forestry outside their natural habitat; (e) ‘ex situ collection’ means a collection of genetic material for agriculture or forestry maintained outside their natural habitat.

2.5. Notifiable aid

(34) Where the conditions of Article 107(1) of the Treaty are met, Member States must notify aid in the agricultural and forestry sectors and in rural areas to the Commission pursuant to Article 108(3) of the Treaty. The Member States must not put the proposed measure into effect until the notification procedure referred to in Article 108(2) of the Treaty has resulted in a final decision, with the exception of measures that fulfil the conditions laid down in the Regulation (EU) 2022/2472.

(35) Individual aid granted on the basis of an aid scheme remains subject to the notification obligation pursuant to Article 108(3) of the Treaty, if the aid exceeds the following notification thresholds: (a) for individual investment aid for the processing of agricultural products and the marketing of agricultural products under Part II, Section 1.1.1.3: eligible costs in excess of EUR 25 million, or where the gross grant equivalent exceeds EUR 12 million; (b) for aid for promotion campaigns under Part II, Section 1.3.4: promotion campaigns with an annual budget in excess of EUR 5 million.

CHAPTER 3

Compatibility assessment pursuant to Article 107(3), point (c), of the Treaty

(36) On the basis of Article 107(3), point (c), of the Treaty, the Commission may consider compatible with the internal market State aid to facilitate the development of certain economic activities, where such aid does not adversely affect trading conditions to an extent contrary to the common interest.

(37) Consequently, in order to assess whether State aid for agriculture, forestry and rural areas can be considered compatible with the internal market, the Commission will determine whether the aid measure facilitates the development of a certain economic activity (first condition) and whether it adversely affects trading conditions to an extent contrary to the common interest (second condition).

(38) In this Section, the Commission clarifies how it will carry out the compatibility assessment. It establishes general compatibility conditions and, where applicable, sets out specific conditions for aid schemes and additional conditions for individual aid which is subject to the obligation of notification.

(39) In order to make the assessment referred to in point (37), the Commission will consider the following aspects: (a) First condition: aid facilitates the development of an economic activity: (i) identification of the economic activity concerned (Section 3.1.1); (ii) incentive effect: the aid must change the behaviour of the undertaking(s) concerned in such a way that it engages in additional activity, which it would not carry out without the aid or which it would carry out in a restricted or different manner (Section 3.1.2); (iii) the aid does not contravene relevant provisions and general principles of Union law (Section 3.1.3). (b) Second condition: aid does not unduly affect trading conditions to an extent contrary to the common interest: (i) need for State intervention: the aid measure must bring about a material improvement that the market cannot deliver by itself, for example by remedying a market failure or addressing an equity or cohesion concern where applicable (Section 3.2.1); (ii) appropriateness of the aid measure: the proposed aid measure must be an appropriate policy instrument to facilitate the development of the economic activity (Section 3.2.2); (iii) proportionality of the aid (aid limited to the minimum necessary): the amount and intensity of the aid must be limited to the minimum needed to induce the additional investment or activity by the undertaking(s) concerned (Section 3.2.3); (iv) transparency of aid: Member States, the Commission, economic operators, and the public, must have easy access to all relevant acts and to pertinent information about the aid granted thereunder (Section 3.2.4); (v) avoidance of adverse negative effects of the aid on competition and trade (Section 3.2.5); (vi) weighing up the positive and negative effects that aid can have on competition and trade between Member States (balancing test) (Section 3.2.6).

(40) The overall balance of certain categories of schemes may further be made subject to a requirement of ex post evaluation as described in points (639) to (645). In such cases, the Commission may limit the duration of those schemes (normally to four years or less) with a possibility to re-notify their prolongation afterwards.

(41) These general compatibility criteria apply to all aid covered by these Guidelines, unless derogations are provided for in Sections 3.1 and 3.2 of this Part, due to particular considerations applicable in the agricultural sector.

3.1. First condition: aid facilitates the development of an economic activity

3.1.1. Aided economic activity

(42) On the basis of the information provided by the Member State, the Commission will identify the economic activity to be supported by the notified measure.

(43) The Member State must demonstrate that the aid aims at facilitating the development of the identified economic activity.

(44) Member States must also describe whether and, if so, how the aid will contribute to the achievement of the objectives of the CAP and within that policy to the objectives of Regulation (EU) 2021/2115 and describe more specifically the expected benefits of the aid.

(45) The Commission considers that aid in favour of risk and crisis management measures granted in compliance with Part II, Section 1.2 of these Guidelines can facilitate the development of the identified economic activity or area, as without aid such development may not take place to the same extent.

Additional conditions for individually notifiable aid on the basis of a scheme

(46) When awarding aid to individually notifiable investment projects on the basis of a scheme, referred to in point (35), the granting authority must demonstrate that the selected project will contribute towards the objective of the scheme and thus towards the objectives of aid in the agricultural and forestry sectors and in rural areas. For that purpose, Member States should refer to the information provided by the applicant for aid where the positive effects of the investment must be described.

3.1.2. Incentive effect

(47) Aid in the agricultural and forestry sectors and in rural areas can only be found compatible with the internal market if it has an incentive effect. An incentive effect is present when the aid changes the behaviour of an undertaking in such a way that it engages in additional activity contributing to the development of the sector which it would not have engaged in without the aid or in which it would only have engaged in a restricted or different manner. The aid must, however, not subsidise the costs of an activity that an undertaking would have incurred in any event and must not compensate for the normal business risk of an economic activity.

(48) Unless exceptions are expressly provided for in Union legislation or in these Guidelines, State aid measures which are simply intended to improve the financial situation of undertakings but which in no way contribute to the development of the sector, and in particular aid which is granted solely on the basis of price, quantity, unit of production or unit of the means of production are considered to constitute operating aid which is incompatible with the internal market. Furthermore, by its very nature, such aid is also likely to interfere with the mechanisms regulating the organisation of the internal market.

(49) Aid granted under Part II, Sections 1.2 and 2.8.5 should be limited to helping undertakings active in the agricultural and forestry sectors facing various difficulties despite having undertaken reasonable efforts to minimise such risks. State aid should not have as an effect to entice undertakings into taking unnecessary risk. Undertakings active in the agricultural and forestry sectors should themselves bear the consequences of imprudent choices of production methods or products.

(50) For the reasons explained in point (47), the Commission considers that aid does not present an incentive for the beneficiary wherever work on the relevant project or activity has already started prior to the aid application by the beneficiary to the national authorities.

(51) The aid application must include at least the applicant’s name and the size of the undertaking, a description of the project or activity, including its location and start and end dates, the amount of aid needed to carry it out and the eligible costs.

(52) In addition, large enterprises must describe in the application the situation without the aid, which situation is referred to as the counterfactual scenario or alternative project or activity and submit documentary evidence in support of the counterfactual described in the application. This requirement does not apply to municipalities that are autonomous local authorities with an annual budget of less than EUR 10 million and fewer than 5 000 inhabitants.

(53) When receiving an application, the granting authority must carry out a credibility check of the counterfactual scenario and confirm that the aid has the required incentive effect. A counterfactual scenario is credible if it is genuine and relates to the decision-making factors prevalent at the time of the decision by the beneficiary regarding the project or activity concerned.

(54) Aid in the form of tax advantages is deemed to have an incentive effect if the aid scheme establishes a right to aid in accordance with objective criteria and without further exercise of discretion by the Member State and if the aid scheme has been adopted and in force before work on the aided project or activity has started. The latter requirement does not apply in the case of fiscal successor schemes provided the activity was already covered by the previous schemes in the form of tax advantages.

(55) By way of derogation from points (50) to (54), the following categories of aid are not required to have or are deemed to have an incentive effect: (a) aid schemes for land consolidation in accordance with Part II, Section 1.3.6 and Section 2.9.2 and aid schemes with ecological, protective and recreational objectives in accordance with Part II, Section 2.8 and where the following conditions are fulfilled: (i) the aid scheme establishes a right to aid in accordance with objective criteria and without further exercise of discretion by the Member State; (ii) the aid scheme has been adopted and is in force before eligible costs under Part II, Sections 1.3.6, 2.8 and 2.9.2 are incurred by the beneficiary; (iii) the aid scheme only covers SMEs; (b) aid for area-specific disadvantages resulting from certain mandatory requirements in accordance with Part II, Section 1.1.6; (c) aid to areas facing natural or other specific constraints in accordance with Part II, Section 1.1.7; (d) aid for information actions in the agricultural sector in accordance with Part II, Section 1.1.10.1, which consists of making available the information to an undefined number of beneficiaries; (e) aid to make good the damage caused by natural disasters or exceptional occurrences in accordance with Part II, Section 1.2.1.1; (f) aid to compensate for the damage caused by adverse climatic events which can be assimilated to natural disaster in accordance with Part II, Section 1.2.1.2; (g) aid to compensate for the costs of the prevention, control and eradication of animal diseases and plant pests and for losses caused by those animal diseases and plant pests in accordance with Part II, Section 1.2.1.3; (h) aid to cover the costs of the removal and destruction of fallen stock in accordance with Part II, Section 1.2.1.4; (i) aid to compensate for the damage caused by protected animals in accordance with Part II, Section 1.2.1.5; (j) aid to make good the damage in forests caused by animals regulated by law in accordance with Part II, Section 2.8.5; (k) aid for information actions in the forestry sector in accordance with Part II, Section 2.4, which consists of making available the information to an undefined number of beneficiaries; (l) aid for investments in favour of conservation of cultural and natural heritage on the agricultural holding in accordance with Part II, Section 1.1.1.2, with the exception of individual aid which exceeds EUR 500 000 per undertaking per investment project; (m) aid for promotion measures in accordance with point (468) (b), (c) and (d); (n) aid to compensate for additional transport costs in accordance with points (480) and (481); (o) aid for research and development in the agricultural and forestry sectors in accordance with Part II, Section 1.3.7 and Section 2.9.1; (p) aid for the restoration of damage to forests from fires, natural disasters, adverse climatic events, plant pests, animal diseases, catastrophic events and climate change related events in accordance with Part II, Section 2.1.3; (q) aid for the costs of treatment and preventing the spreading of pests and tree diseases and aid to make good the damage caused by the pests and tree diseases in accordance with Part II, Section 2.8.1.

Additional conditions for individually notifiable investment aid

(56) In addition to the requirements set out in this Section, for individually notifiable investment aid, the Member State must provide clear evidence that the aid effectively has an impact on the investment choice. To allow for a comprehensive assessment, the Member State must provide not only information concerning the aided project but also a comprehensive description of the counterfactual scenario, in which no aid is granted to the beneficiary by any public authority.

(57) The Member States are invited to draw on genuine and official board documents, risk assessments, including the assessment of location-specific risks, financial reports, internal business plans, expert opinions and other studies related to the investment project under assessment. Those documents need to be contemporary to the decision-making process concerning the investment or its location. Documents containing information on demand forecasts, cost forecasts, financial forecasts, documents that are submitted to an investment committee and that elaborate on various investment scenarios, or documents provided to the financial institutions could help the Member States to demonstrate the incentive effect.

(58) In this context the level of profitability may be evaluated by using methods that are standard practice in the sector concerned and which may include methods to evaluate the net present value (NPV) ( 29 ) of the project, the internal rate of return (IRR) ( 30 ) or the average return on capital employed (ROCE). The profitability of the project is to be compared with normal rates of return applied by the beneficiary in other investment projects of a similar kind. Where these rates are not available, the profitability of the project is to be compared with the cost of capital of the undertaking as a whole or with the rates of return commonly observed in the sector concerned.

(59) Where no specific counterfactual scenario is known, the incentive effect can be assumed when there is a funding gap. That is when the investment costs exceed the NPV of the expected operating profits of the investment on the basis of an ex ante business plan.

(60) If the aid does not change the behaviour of the beneficiary by stimulating additional investment, it has no positive effects for development of the sector concerned. Therefore, aid will not be considered compatible with the internal market if it appears that the same investment would still be pursued without the aid.

3.1.3. No breach of relevant provisions and general principles of Union law

(61) If a State aid measure, the conditions attached to it, including its financing method when the financing method forms an integral part of the State aid measure, or the activity it finances entails a violation of relevant Union law, the aid cannot be declared compatible with the internal market ( 31 )

(62) Due to the specificity of the agricultural sector ( 32 ) , although State aid rules are generally applicable to this sector, their application nevertheless remains subject to the provisions laid down in the regulations of the first pillar of the CAP. In other words, Member States’ recourse to State aid measures cannot take precedence over Regulation (EU) No 1308/2013 ( 33 ) . Therefore, the Commission will not authorise State aid which is incompatible with the provisions governing the common organisation of the market or which would interfere with the proper functioning of the common organisation.

(63) Moreover, State aid cannot be declared compatible with the internal market where the award of aid is subject to the obligation for the beneficiary undertaking to use national products or services, as well as for aid restricting the possibility for the beneficiary undertaking to exploit the research, development and innovation results in other Member States.

(64) The Commission will not authorise aid for export-related activities to third countries or to Member States which would be directly linked to the quantities exported, aid contingent upon the use of domestic over imported goods, or aid to establish and operate a distribution network or to cover any other expenditure linked to export activities. Aid towards the cost of participating in trade fairs, or of studies or consultancy services needed for the launch of a new or existing product on a new market in principle does not constitute export aid.

3.2. Second condition: aid does not unduly affect trading conditions to an extent contrary to the common interest

(65) Pursuant to Article 107(3), point (c), of the Treaty, aid to facilitate the development of certain economic activities or of certain economic areas can be declared compatible, but only ‘where such aid does not adversely affect trading conditions to an extent contrary to the common interest’.

(66) This Section sets out the method of exercise of the Commission’s discretion in carrying out the assessment under the second condition of the compatibility assessment referred to in point (39)(b).

(67) By its very nature, any aid measure generates distortions of competition and has an effect on trade between Member States. However, in order to establish if the distortive effects of the aid are limited to the minimum, the Commission will verify whether the aid is necessary, appropriate, proportionate and transparent.

(68) The Commission will then assess the distortive effect of aid in question on competition and trading conditions. The Commission will then balance the positive effects of the aid with its negative effects on competition and trade. Where the positive effects outweigh the negative effects, the Commission will declare the aid compatible.

(69) The compliance of aid with conditions laid down in Sections 3.2.1 to 3.2.5 of this Chapter must be seen in the specific context of the CAP.

3.2.1. Need for State intervention

(70) To assess whether State aid is necessary for achieving the intended outcome, it is first necessary to diagnose the problem. State aid must be targeted to situations where aid can bring about a material development that the market cannot deliver, for example by remedying a market failure to the aided activity or investment in question. State aid measures can indeed, under certain conditions, correct market failures thereby contributing to the efficient functioning of markets and enhancing competitiveness.

(71) For the purposes of these Guidelines, the Commission considers that the market is not delivering the expected objectives without State intervention concerning the aid measures fulfilling the specific conditions laid down in Part I. Therefore, such aid should be considered necessary.

3.2.2. Appropriateness of aid

(72) The proposed aid measure must be an appropriate policy instrument to address the concerned policy objective. It is important to keep in mind that there may be other, better placed instruments such as regulation, market-based instruments, infrastructure development and improvement in the business environment to achieve those objectives. To that end, the Member State must demonstrate that the aid and its design are appropriate to achieve the objective of the measure at which the aid is targeted.

Appropriateness among alternative policy instruments

(73) The Commission considers that aid granted in the agricultural and forestry sectors, which fulfils the specific conditions laid down in the relevant Sections of Part II, is an appropriate policy instrument.

(74) Where a Member State decides to put in place a rural development-like aid measure financed exclusively from national funds, when at the same time the same intervention is provided for in the relevant the CAP Strategic Plan, the Member State should demonstrate the advantages of such a national aid instrument compared to the CAP Strategic Plan intervention at stake.

Appropriateness among different aid instruments

(75) Aid can be granted in various forms. The Member State should however ensure that the aid is granted in the form that is likely to generate the least distortions of trade and competition.

(76) Where a specific form is set out for an aid measure as described in Part II, such form is considered to be an appropriate aid instrument for the purpose of these Guidelines.

(77) Where the aid is granted to the final beneficiary in the form of a subsidised service, i.e. indirectly, in kind, and is paid to a provider of the service or activity in question, the compatibility assessment pursuant to Article 107(3), point (c), of the Treaty as set out in this Part and the specific conditions of these Guidelines apply to the final beneficiary.

(78) The Commission considers that aid granted in the form provided for in the respective rural development interventions, co-financed by EAFRD or granted as an additional financing for such co-financed rural development interventions, is an appropriate aid instrument.

(79) As regards investment aid not included in a CAP Strategic Plan or as additional financing for such a rural development intervention, where the aid is granted in forms that provide a direct pecuniary advantage (for example, direct grants, exemptions or reductions in taxes, social security or other compulsory charges, etc.), the Member State must demonstrate why other potentially less distortive forms of aid such as repayable advances or forms of aid that are based on debt or equity instruments (for example, low-interest loans or interest rebates, State guarantees or an alternative provision of capital on favourable terms) are less appropriate.

(80) With regard to forestry measures referred to in Part II, Section 2.8, Member States must demonstrate that the ecological, protective and recreational objectives they are aiming for cannot be achieved with the rural development-like forestry measures referred to in Part II, Chapters 2.1 to 2.7.

(81) In the case of several categories of aid, such as aid towards the costs of market research activities, product conception and design and for the preparation of applications for the recognition of quality schemes, aid for knowledge transfer and information actions, aid for advisory services, aid for farm replacement services, aid for promotion measures, aid to compensate for the costs of the prevention and eradication of animal diseases, plant pest and invasive alien species and aid to the livestock sector, the aid must be granted to the final aid beneficiaries by means of subsidised services. In these cases, the aid is paid to the provider of the service or activity in question.

(82) The compatibility assessment of an aid measure with the internal market is without prejudice to the applicable public procurement rules and to the principles of transparency and openness and non-discrimination in the selection process of a service provider.

3.2.3. Proportionality of the aid

(83) Aid is considered to be proportionate if the aid amount per beneficiary is limited to the minimum needed for carrying out the aided activity.

Maximum aid intensities and maximum aid amounts

(84) In principle, in order for the aid to be proportionate, the Commission considers that the aid amount should not exceed the eligible costs. This is without prejudice to rules for environmental or other public incentives that are expressly provided for in Part II, Sections 1.2.2, 2.1.4 and 2.3.

(85) In order to ensure predictability and a level playing field, the Commission applies maximum aid intensities for aid. Where the maximum aid intensity cannot be set, for example in the case of start-up aid for young farmers and the development of small farms, maximum aid amounts defined in nominal terms are set out in order to ensure the proportionality of the aid.

(86) If the eligible costs are correctly calculated and the maximum aid intensities or maximum aid amounts set out in Part II are respected, the criterion of proportionality is deemed to be fulfilled.

(87) The maximum aid intensity and aid amount must be calculated by the granting authority when granting the aid. The eligible costs must be supported by documentary evidence which should be clear, specific and contemporary. For the purposes of calculating the aid intensity and the eligible costs, all figures used must be taken before any deduction of tax or other charge.

(88) Value added tax (VAT) is not eligible for aid, except where it is not recoverable under national VAT legislation.

(89) Where aid is granted in a form other than a grant, the aid amount is the gross grant equivalent of the aid.

(90) Aid payable in several instalments is discounted to its value at the moment of granting the aid. The eligible costs are discounted to their value at the moment of granting the aid. The interest rate to be used for discounting purposes is the discount rate applicable on the date of granting the aid.

(91) Aid payable in the future, including aid payable in several instalments, is discounted to its value at the moment it is granted.

(92) Where aid is granted by means of tax advantages, the discounting of aid tranches takes place on the basis of the discount rates applicable at the various times the tax advantage takes effect.

(93) Member States may fix the aid amount for the measures or types of operations referred to in Part II, Sections 1.1.4, 1.1.5, 1.1.6, 1.1.7, 1.1.8, 2.1.1, 2.1.2, 2.1.4, 2.2 and 2.3 on the basis of standard assumptions of additional costs and income foregone. Member States should ensure that the calculations and the corresponding aid fulfil all of the following: (a) contain only elements that are verifiable; (b) are based on figures established by appropriate expertise; (c) indicate clearly the source of the figures used; (d) are differentiated to take account of regional or local site conditions and actual land use, where applicable; (e) do not contain elements linked to investment costs.

(94) Without prejudice to point (93), aid, with the exception of aid covered by Part II, Sections 1.2 and 2.8.5, may be granted in accordance with the following simplified cost options: (a) unit costs; (b) lump sums; (c) flat-rate financing.

(95) The aid amount referred to in point ((94)) above must be established in one of the following ways: (a) a fair, equitable and verifiable calculation method based on one or more of the following: (i) statistical data, other objective information or an expert judgement; (ii) verified historical data of individual beneficiaries; (iii) the application of usual cost accounting practices of individual beneficiaries; (b) in accordance with the rules for application of corresponding unit costs, lump sums and flat rates applicable in Union policies for a similar type of operation.

(96) As regards co-financed measures, the amounts of eligible costs may be calculated in accordance with the simplified cost options set out in Regulation (EU) 2021/1060 of the European Parliament and of the Council ( 34 ) and Regulation (EU) 2021/2115.

(97) When assessing the compatibility of aid, the Commission will consider any insurance taken out, or which could have been taken out by the aid beneficiary. Regarding aid to compensate for losses caused by adverse climatic events which can be assimilated to a natural disaster, in order to avoid the risk of distorting competition, aid at the maximum aid intensity should be granted only to an undertaking that cannot be covered for such losses by insurance. This is why, in order to further improve risk management, beneficiaries must be encouraged to take out insurance wherever possible.

Additional conditions for individually notifiable investment aid and investment aid to large enterprises under notified schemes

(98) As a general rule, individually notifiable investment aid will be considered to be limited to the minimum if the aid amount corresponds to the net extra costs of implementing the investment in the area concerned, compared to the counterfactual scenario in the absence of aid ( 35 ) , with maximum aid intensities as a cap. Likewise, in the case of investment aid granted to large enterprises under notified schemes, Member States must ensure that the aid amount is limited to the minimum on the basis of a ‘net-extra cost approach’, with maximum aid intensities as a cap.

(99) The aid amount should not exceed the minimum necessary to render the project sufficiently profitable. For example, the aid amount should not lead to an increase of its IRR beyond the normal rates of return applied by the undertaking concerned in other investment projects of a similar kind or, if these rates are not available, to an increase of its IRR beyond the cost of capital of the undertaking as a whole or beyond the rates of return commonly observed in the sector concerned.

(100) For investment aid to large enterprises under notified schemes, the Member State must ensure that the aid amount corresponds to the net extra costs of implementing the investment in the area concerned, compared to the counterfactual scenario in the absence of aid. The method set out in point (99) must be used together with maximum aid intensities as a cap.

(101) As regards individually notifiable investment aid, the Commission will verify whether the aid amount exceeds the minimum necessary to render the project sufficiently profitable, by using the method set out in point (99). Calculations used for the analysis of the incentive effect can also be used to assess if the aid is proportionate. The Member State must demonstrate the proportionality on the basis of documentation such as that referred to in point (57).

(102) Points (98) to (101) do not apply to municipalities that are autonomous local authorities with an annual budget of less than EUR 10 million and fewer than 5 000 inhabitants.

Cumulation of aid

(103) Aid may be granted concurrently under several schemes or cumulated with ad hoc aid, provided that the total amount of State aid for an activity or project does not exceed the aid ceilings laid down in these Guidelines.

(104) Aid with identifiable eligible costs may be cumulated with any other State aid, as long as those aids concern different identifiable eligible costs. Aid with identifiable eligible costs may be cumulated with any other State aid, in relation to the same eligible costs, partly or fully overlapping, only if such cumulation does not result in exceeding the highest aid intensity or aid amount applicable to this type of aid under these Guidelines.

(105) Aid without identifiable eligible costs under Part II, Section 1.1.2 may be cumulated with any other State aid measure with identifiable eligible costs. Aid without identifiable eligible costs may be cumulated with other State aid without identifiable eligible costs, up to the highest relevant total financing threshold fixed in the specific circumstances of each case by these Guidelines or other State aid guidelines, a block exemption regulation or a decision adopted by the Commission.

(106) State aid in favour of the agricultural sector should not be cumulated with payments referred to in Articles 145 and 146 of Regulation (EU) 2021/2115 in respect of the same eligible costs if such cumulation would result in an aid intensity or aid amount exceeding those laid down in these Guidelines.

(107) State aid granted under Part II, Sections 1.1.4, 1.1.5 and 1.1.8 should not be cumulated with payments referred to in Article 31 of Regulation (EU) 2021/2115 in respect of the same eligible costs if such cumulation would result in an aid intensity or aid amount exceeding those laid down in these Guidelines.

(108) Where Union funding centrally managed by the institutions, agencies, joint undertakings or other bodies of the Union that is not directly or indirectly under the control of the Member State is combined with State aid, only the latter will be considered for determining whether the notification thresholds and maximum aid intensities and ceilings are respected, provided that the total amount of public funding granted in relation to the same eligible costs does not exceed the most favourable funding rate(s) laid down in the applicable rules of Union law.

(109) Aid authorised under these Guidelines should not be cumulated with any de minimis aid in respect of the same eligible costs if such cumulation would result in an aid intensity or aid amount exceeding that fixed in these Guidelines.

(110) Aid for investments aimed at the restoration of agricultural production potential as referred to in point (152)(d) should not be cumulated with aid for the compensation of material damage referred to in Part II, Sections 1.2.1.1, 1.2.1.2 and 1.2.1.3.

(111) Start-up aid for producer groups and organisations in the agricultural sector as referred to in Part II, Section 1.1.3 should not be cumulated with the corresponding support for producers groups and organisations in the agricultural sector as referred to in Article 77 of Regulation (EU) 2021/2115. Start-up aid for young farmers, start-up aid for the development of small farms and start-up aid for agricultural activities as referred to in Part II, Section 1.1.2 should not be cumulated with the corresponding support as referred to in Article 75 of Regulation (EU) 2021/2115 if such cumulation would result in an aid amount exceeding those laid down in these Guidelines.

3.2.4. Transparency

(112) Member States must ensure the publication of the following information in the European Commission’s transparency award module ( 36 ) or on a comprehensive State aid website at national or regional level: (a) the full text of the aid scheme and its implementing provisions or legal basis for individual aid, or a link to it; (b) the identity of the granting authority or authorities; (c) the identity of the individual beneficiaries (37), the form and amount of aid granted to each beneficiary, the date of granting, the type of undertaking (SME/ large enterprise), the region in which the beneficiary is located (at NUTS level II) and the principal economic sector in which the beneficiary has its activities (at NACE group level). Such a requirement can be waived with respect of individual aid awards not exceeding the following thresholds: (i) EUR 10 000 for beneficiaries active in the primary agricultural production; (ii) EUR 100 000 for beneficiaries in the sectors of the processing of agricultural products, the marketing of agricultural products, the forestry sector or activities falling outside the scope of Article 42 of the Treaty.

(113) For aid schemes in the form of tax advantages the information on individual aid amount can be provided in the following ranges (in EUR million): 0,01-0,1 only for primary agricultural production; 0,1-0,5; 0,5-1; 1 to 2; 2 to 5; 5 to 10; 10 to 30; and 30 and more.

(114) Such information must be published after the decision to grant the aid has been taken, must be kept for at least 10 years and be available for the general public without restrictions ( 38 )

(115) For reasons of transparency Member States must carry out reporting and revision as required in Part III, Chapter 2.

3.2.5. Avoidance of adverse negative effects on competition and trade

(116) Aid for the agricultural and forestry sectors and for rural areas may potentially cause product market distortions. For the aid to be compatible, the negative effects of the aid measure in terms of distortions of competition and impact on trade between Member States must be minimised.

(117) The Commission will identify the market(s) affected by the aid, taking into account the information provided by the Member State on the product market(s) concerned, that, is to say the market(s) affected by the change in behaviour of the aid beneficiary. In assessing the negative effects of the aid measure, the Commission will focus its analysis of the distortions of competition on the predictable impact the aid in the agricultural and forestry sectors and in rural areas has on competition between undertakings in the product market(s) affected ( 39 )

(118) As a starting point, if the aid is well targeted, proportionate and limited to the net extra costs, the negative impact of the aid is softened and the risk that the aid will adversely distort competition will be more limited. Second, the Commission establishes maximum aid intensities or aid amounts. The aim is to prevent the use of State aid for projects where the ratio between aid amount and eligible costs is to be deemed very high and particularly likely to be distortive. In general, the greater the positive effects the aided project is likely to give rise to and the higher the likely need for aid, the higher the cap on aid intensity.

(119) However, even where aid is necessary and proportionate, it may result in a change of the behaviour of the beneficiaries which distorts competition. This is more likely in the agricultural sector which differs from other markets by the specific structure of primary agricultural production that is characterised by a high number of small undertakings involved. On such markets the risk of distortion of competition is high even when only small amounts of aid are granted.

Investment aid schemes for the processing of agricultural products and the marketing of agricultural products and in the forestry sector

(120) Because investment aid to undertakings active in the processing of agricultural products and the marketing of agricultural products and to undertakings active in other sectors, for example, in the food processing sector, tends to have similar distortive effects on competition and trade, the general competition policy considerations on the effect on competition and trade should apply equally to all those sectors. Therefore, the conditions described in points (121) to (133) must be respected as regards investment aid for the processing of agricultural products and for the marketing of agricultural products and in the forestry sector.

(121) Aid schemes must not lead to significant distortions of competition and trade. In particular, even where distortions may be considered limited at an individual level (provided all conditions for investment aid are fulfilled), on a cumulative basis investment aid schemes might still lead to high levels of distortion. In the case of an investment aid scheme focusing on certain sectors, the risk of such distortions is even more pronounced.

(122) Therefore, the Member State concerned must demonstrate that any negative effects will be limited to the minimum taking into account, for example, the size of the projects concerned, the individual and cumulative aid amounts, the expected beneficiaries as well as the characteristics of the targeted sectors. In order to enable the Commission to assess the likely negative effects, the Member State is encouraged to submit any impact assessment at its disposal as well as ex-post evaluations carried out for similar schemes.

Individually notifiable investment aid for the processing of agricultural products and the marketing of agricultural products and in the forestry sector

(123) In appraising the negative effects of individual investment aid, the Commission places particular emphasis on the negative effects linked with the build-up of overcapacity in declining markets, the prevention of exit, and the notion of substantial market power. These negative effects are described in points (124) to (133) and must be counterbalanced with the positive effects of the aid.

(124) In order to identify and assess the potential distortions of competition and trade, Member States should provide evidence permitting the Commission to identify the product markets concerned (that is to say, products affected by the change in the behaviour of the aid beneficiary) and to identify the competitors and customers/consumers affected. The product concerned is typically the product covered by the investment project ( 40 ) . When the project concerns an intermediate product and a significant part of the output is not sold on the market, the product concerned may be the downstream product. The relevant product market includes the product concerned and its substitutes considered to be such, either by the consumer (by reason of the product’s characteristics, prices, or intended use) or by the producer (by reason of flexibility of production installations).

(125) The Commission uses various criteria to assess those potential distortions, such as market structure of the product concerned, performance of the market (declining or growing market), process for selection of the aid beneficiary, entry and exit barriers, product differentiation.

(126) A systematic reliance on State aid by an undertaking could indicate that the undertaking is unable to withstand competition on its own or that it derives undue advantages compared to its competitors.

(127) The Commission distinguishes two main sources of potential negative effects on product markets: (a) cases of significant capacity expansion which leads to or deteriorates an existing situation of overcapacity, especially in a declining market; (b) cases where the aid beneficiary holds substantial market power.

(128) To evaluate whether the aid serves to create or maintain inefficient market structures, the Commission will take into account the additional production capacity created by the project and whether the market is underperforming.

(129) If the market in question is growing, there is typically less cause for concern that the aid will negatively affect dynamic incentives or will unduly impede market exit or entry.

(130) More concern is warranted when markets are in decline. The Commission distinguishes between cases for which, with a long-term outlook, the market is structurally in decline (i.e. it is contracting), and cases for which the market is in relative decline (i.e. it is still growing, but does not exceed a benchmark growth rate).

(131) Underperformance of the market is typically measured against the European Economic Area (EEA) GDP over the three years before the start of the project (benchmark rate). It can also be measured on the basis of projected growth rates for the next three to five years. Indicators may include the expected future growth of the market concerned and the resulting expected capacity utilisation rates, and the likely impact of the capacity increase on competitors in terms of prices and profit margins.

(132) In certain cases, assessing the growth of the product market in the EEA may not be appropriate to entirely assess all the effects of aid, in particular if the geographic market is global. In such cases, the Commission will consider the effect of the aid on the market structures concerned, in particular, its potential to crowd out producers in the EEA.

(133) To evaluate the existence of substantial market power, the Commission will take into account the position of the beneficiary over a period of time before receiving the aid and the expected market position after finalising the investment. The Commission will take account of the market shares of the beneficiary, as well as of the market shares of its competitors and other relevant factors. For example, it will assess the market structure by looking at market concentration, potential barriers to entry ( 41 ) , buyer power ( 42 ) and barriers to expansion or exit.

3.2.6. Weighing up the positive and the negative effects of the aid (balancing test)

(134) The Commission assesses whether the positive effects of the aid measure outweigh the identified negative effects on competition and trading conditions. The Commission may conclude on the compatibility of the aid measure with the internal market only where the positive effects outweigh the negative ones.

(135) In cases where the proposed aid measure does not address a well-identified market failure in an appropriate and proportionate way, the negative distortive effects on competition will tend to outweigh the positive effects of the measure; hence the Commission is likely to conclude that the proposed aid measure is incompatible.

(136) As part of the assessment of the positive and negative effects of the aid, the Commission will take into account the impact of the aid on the achievement of the general and specific objectives of the CAP set out in Articles 5 and 6 of Regulation (EU) 2021/2115, that aim to foster a smart, competitive, resilient and diversified agricultural sector, support and strengthen environmental protection, including biodiversity, and climate action and to contribute to achieving the environmental and climate-related objectives of the Union and to strengthen the socio-economic fabric of rural areas.

(137) In principle, due to its positive effects on the development of the sector, the Commission considers that where an aid fulfils the conditions, and does not exceed the relevant maximum aid intensities or maximum aid amounts, laid down in the applicable Sections of Part II, the negative effect on competition and trade is limited to the minimum.

(138) With respect to State aid which is co-financed under Regulation (EU) 2021/2115, or financed by the Union, the Commission will consider that the related positive effects have been established.

(139) All State aid notifications should contain an assessment on whether or not the aided activity is expected to have any environmental and/or climate impact, taking into account environmental protection legislation ( 43 ) , and the standards of good agricultural and environmental condition (GAEC) under Regulation (EU) 2021/2115. Where it is demonstrated that aid has positive environmental and climate impact, the Commission will consider that the positive effects of such aid have been established. Article 11 of the Treaty provides that ‘environmental protection requirements must be integrated into the definition and implementation of the Union’s policies and activities, in particular with a view to promoting sustainable development.’ The Union’s promotion of the aim of protecting the environment as set out in that Article 11 of the Treaty also takes into account the polluter pays principle. Therefore, particular attention should be given to environmental and climate issues in State aid notifications.

(141) Where aid is granted under these Guidelines in favour of investments, the Commission will also pay attention to Article 3 of Regulation (EU) 2020/852 of the European Parliament and of the Council ( 50 ) , including the ‘Do no significant harm’ principle, or other comparable methodologies.

PART II

CATEGORIES OF AID

CHAPTER 1

Aid in favour of undertakings active in the primary production, processing and marketing of agricultural products

1.1. Rural development-like measures

1.1.1. Aid for investment

(142) This Section applies to investment in agricultural holdings linked to the primary agricultural production, to investment in connection with the processing of agricultural products and the marketing of agricultural products.

(143) All aid for investment under Sections 1.1.1.1, 1.1.1.2 and 1.1.1.3 of this Part must not be granted in contravention of any prohibition or restriction laid down in Regulation (EU) No 1308/2013, even where such prohibitions and restrictions only refer to the Union support provided for in that Regulation.

1.1.1.1. Aid for investments in agricultural holdings linked to primary agricultural production

(144) The Commission will consider aid for investments in agricultural holdings linked to primary agricultural production compatible with the internal market under Article 107(3), point (c), of the Treaty if it complies with Part I, Chapter 3, of these Guidelines, the general condition for investment aid set out in point (134) and the conditions set out in this Section.

(145) This Section applies to aid for investments in tangible assets and intangible assets on agricultural holdings linked to the primary agricultural production. The investment is carried out by one or more beneficiaries or concerns a tangible asset or intangible asset used by one or more beneficiaries.

(146) This Section also applies to investment in tangible assets and intangible assets linked to the production of biofuels or to the production of energy from renewable sources on holdings, which fulfils one of the following conditions: (a) where the investment is made for the production of biofuels as defined in Article 2, point (33), of Directive (EU) 2018/2001 on agricultural holdings, renewable energy production facilities are eligible for aid only if their annual production capacity is no more than equivalent to the annual average fuel consumption of the agricultural holding; the produced biofuel should not be sold on the market; (b) where the investment is made for the production of thermal energy and/or electricity from renewable sources on agricultural holdings, the renewable energy production facilities are eligible for aid only if the aim is to serve their own energy needs and their annual production capacity is no more than equivalent to the combined average annual energy consumption of thermal energy and electricity on the agricultural holding, including the farm household; regarding electricity, the selling of electricity is allowed into the grid as far as the annual average self-consumption limit is respected.

(147) Where more than one agricultural holding carry out the investment for the production of energy from renewable sources with the aim to serve their own energy needs or for the production of biofuels on holdings, the annual average consumption is equivalent to the sum of the annual average consumption of all beneficiaries.

(148) Member States must require compliance with minimum standards for energy efficiency for investments in renewable energy infrastructure that consume or produce energy, where such standards exist at national level.

(149) Investments in installations, the primary purpose of which is electricity production from biomass, are not eligible for aid unless a minimum percentage, of the heat energy produced, to be determined by the Member States, is utilised.

(150) Member States must establish thresholds for the maximum proportions of cereals and other starch rich crops, sugar and oil crops used for bioenergy production, including biofuels, for different types of installations in accordance with Article 26 of Directive (EU) 2018/2001. Aid to bioenergy projects must be limited to bioenergy meeting the applicable sustainability and greenhouse gas emissions saving criteria laid down in Union legislation including Article 29 of Directive (EU) 2018/2001.

(151) If the production capacity of the installation exceeds the average annual consumption of the beneficiary or beneficiaries as referred to in points (146) and (147), Member States must comply with the conditions laid down in the Guidelines on State aid for climate, environmental protection and energy 2022 unless such aid is exempt from the notification obligation.

(152) The investment must pursue at least one of the following objectives: (a) the improvement of the overall performance and sustainability of the agricultural holding, in particular through a reduction of production costs or the improvement and re-deployment of production; (b) the improvement of the natural environment, hygiene or animal welfare standards; (c) the creation and improvement of infrastructure related to the development, adaptation and modernisation of agriculture, including access to farm land, land consolidation and land improvement, the supply of sustainable energy, energy efficiency, supply and saving of water; (d) the restoration of agricultural production potential damaged by natural disasters, exceptional occurrences or adverse climatic events which can be assimilated to a natural disaster, animal diseases and plant pests, protected animals and the prevention and risk mitigation of damage caused by those before-mentioned events and factors; (e) contributing to climate change mitigation and adaptation, including by reducing greenhouse gas emissions and enhancing carbon sequestration, as well as promoting sustainable energy and energy efficiency; (f) contributing to sustainable circular bioeconomy and fostering sustainable development and efficient management of natural resources such as water, soil and air, including by reducing chemical dependency; (g) contributing to halting and reversing biodiversity loss, enhancing ecosystem services and preserving habitats and landscapes.

Eligible costs

(153) The aid covers the following eligible costs: (a) the construction, acquisition, in