The rules should also be aligned to future challenges and Commission priorities. This is in particular important as State aid can, and should, contribute to the Green Deal, as well as the Digital and Industrial Strategies. This is key, given the past and, most crucially, future budgetary constraints. In particular, the GBER, Regional aid Guidelines, RDI Framework, IPCEI Communication, Risk Finance Guidelines and the EEAG need to be adapted in the short term, also in light of the new EU priorities. STEC also needs to be revised to align it to SAM. In addition, adaptations of the de minimis Regulation, Aviation Guidelines and Rescue and Restructuring Guidelines are needed in the medium term. The Railway Guidelines are outdated and need a complete overhaul.

However, the individual rules need revision and/or update, including clarifications, further streamlining and simplification, as well as adjustments to reflect recent legislative developments, current priorities, market and technology developments.

The assessment in the current Fitness Check suggests that, overall, the SAM architecture and State aid rules which were reformed under the SAM initiative, are broadly fit for purpose. SAM seems to be largely effective in reaching its triple objective, and in particular, through the objective of “good aid”, State resources are channelled to where it really matters. There is no need to reform the State aid system of SAM as such.

Overall the existence of the State aid rules evaluated under the Fitness Check has a clear EU added value that is acknowledged by stakeholders as it brings similarities in the design of Member States compensation schemes, reduces administrative costs and provides clarity, stability and predictability.

With regard to external coherence, the analysis suggests that the State aid rules under the Fitness Check are to a certain extent coherent with other EU policies and legislation. It appears however that the rules do not always reflect more recent legislative developments after their adoption. New EU policies and legislation stemming from the Commission’s priorities, in particular the Green Deal, the Digital and Industrial Strategies, are not mirrored/implemented yet.

As regards internal coherence, it appears that the SAM rules form a rather coherent package, albeit some technical alignments may be necessary. Certain SAM provisions, such as on the requirement for transparency and ex-post evaluation of the implemented national measures slightly diverge. The Railway Guidelines and STEC, which predate the reform, should be adapted to SAM.

As to the relevance of the rules, the Fitness Check indicated that the overall SAM objectives are appropriate for meeting the needs within the EU. It also suggests that the objectives of the individual State aid rules have been to a large extent appropriate for meeting the needs within the EU so far, but that they do not fully reflect recent EU policy developments and Commission priorities for the future, in particular the Green Deal, the Digital and Industrial Strategies. The potential impact and the uncertainties brought by the COVID-19 crisis cannot be fully evaluated yet. The analysis suggests that the State aid rules under the Fitness Check are to a certain extent adapted to subsequent market developments and technological advances, but further adaptation in specific areas and a certain degree of flexibility may be needed in the future, depending on the specific rule.

With regard to efficiency, the available evidence also suggests that the SAM rules have to a certain extent allowed to decrease administrative burden, albeit there still seems to be room for improvement, in particular with regard to the clarification of certain definitions and concepts. Moreover, the analysis also suggests that the SAM rules, in light of the achieved objective of "good aid", allowed for a more efficient State expenditure. It appears that benefits derive from SAM, not only for public authorities, but also for undertakings and indirectly for consumers. The benefits deriving from SAM, seem to outweigh the costs associated.

The individual rules seem to have, to a large extent, also proven to be effective in achieving their specific objectives, even though the present Fitness Check has also revealed various issues that may need further clarification or fine-tuning.

The analysis suggests that the SAM as a whole largely met its triple objective and hence is effective as a State aid architecture. As regards the General Block Exemption Regulation, while there might still be scope for a further increase of expenditure under the current block-exemption rules in the coming years, in line with the approach to focus on cases with a big impact on competition, the current system also ensures that the Commission keeps examining a limited number of measures involving large amounts which have to be notified. The implementation of the common assessment principles seems to have led to a clearer methodological framework for the various State aid rules contributing to the achievement of the objective of fostering “good aid”. In addition, SAM seems to have contributed to a significant clarification of the relevant State aid rules, even though some problematic areas have still been identified.

The results of the Fitness Check also need to be interpreted in the light of the COVID-19 crisis because future policy-making cannot disregard the imbalances created in the Member States’ economies due to it. The fact-finding and assessment were done pre-COVID-19 and largely before the adoption of major priorities earlier in spring 2020. While, overall, the conclusions of the Fitness Check appear to be sound to the majority of the rules to a large extent, there might be certain areas, such as aviation for instance, where uncertainties concerning the validity of conclusions reached might be more pronounced.

The findings of the analysis are subject to the limitations stemming from the stakeholder consultation and constraints on the possibility of full triangulation at certain instances.

The present Fitness Check aims at assessing SAM as a whole and not carrying out individual evaluations of the specific rules. In addition, it is also to be seen as a “mid-term review” or an “implementing evaluation” that examines whether everything is on track or if there is a case for making any changes.

One of the minor issues detected relates to the fact that STEC predates SAM. While it reflects well the main objectives of the SAM, also taking into account the specificities of the area it covers, it is not fully aligned with the single common principles as set out in SAM. Furthermore, there may be a need for a technical update of STEC to take into account indicators such as inflation

The Fitness Check showed that STEC ensures an adequate competition level between private and public export-credit insurers as well as between exporters in the EU single market.

Possible action: Overhaul of the Railway Guidelines in the medium term, also in the light of the impact of the ongoing railway liberalisation

As regards the COVID-19 outbreak, on the one hand, it has produced massive negative demand shocks in passenger transport. On the other hand, rail freight transport has suffered from a substantial loss of intermodal volumes, a disruption of supply chains from China as well as the heavily disturbed intercontinental flow of cargo. In addition, the rail freight sector has been facing increased costs like unforeseen rolling stock parking fees. At present there is a lack of sufficiently reliable sectorial information to make a thorough assessment of the impact of the pandemic on possible responses. Nevertheless, the effects of the pandemic so far do not change the findings of the present Fitness Check (i.e. that the Railway Guidelines are outdated and need a complete overhaul). On the contrary, they confirm those findings and make them even more topical in the light of the need to improve the take-up of sustainable modes of transport, drawing all lessons from the crisis.

The assessment suggests that the Railways Guidelines are not fit for purpose. The Railways Guidelines may need a full-fledged review to align them with the current legislation and to make them fit for the full liberalisation and market opening.

As regards the effects of the COVID-19 crisis, the conditions for aid under the Temporary Framework are less stringent then under the Rescue and Restructuring Guidelines. Therefore, in the short term, it is possible that many Member States will provide aid under the Temporary Framework for undertakings in financial difficulty, if possible. However, the need for the rescue and restructuring aid could increase as a result of the crisis in the mid- to long-term. In particular, undertakings, which were in difficulty end of 2019 are not eligible for aid under the Temporary Framework (except for small and micro undertakings). Ultimately, at this stage, the COVID-19 crisis does not seem to have an impact on the findings of the Fitness Check with regard to Rescue and Restructuring Guidelines.

The assessment suggests that while the ‘Undertaking in difficulty’ definition largely meets its objective to identify companies in need of rescue or restructuring, it is not entirely clear and easy to apply for national authorities for the purposes of GBER, so that guidance and/or technical clarification might be needed. The criterion of disappearing capital may capture companies which would not necessarily go out of business, and those are consequently excluded from benefitting from GBER and other aid. Furthermore, for specific types of legal entity forms the definition does not appear fit for purpose, for example as regards public institutions, local authorities, NGOs and undertakings without legal requirements on capital. This could lead to diverging application in Member States, in particular when it comes to the assessment of exclusion from GBER and other aid.

Given that the number of cases under the 2014 Rescue and Restructuring Guidelines are limited, the case practice is not sufficient to evaluate all the changes brought by the 2014 modification. Therefore, the Fitness Check focused on one of the major changes of the Rescue and Restructuring Guidelines, namely the modified definition of 'undertaking in difficulty', which is also an exclusion criteria for GBER and other aid.

Possible action: Amendment of the EEAG in the short term, also in the light of new Commission priorities

Finally there is scope for further clarifying and simplifying a series of concepts and provisions, taking into account additional case practice and experience. In terms of relevance as regards EU priorities, the EEAG and GBER related provisions should be revised to better accompany the Green Deal in all its facets (carbon neutral and circular economy, biodiversity, zero pollution ambition) and the new Industrial Strategy.

More could be done to contribute to the Energy Union, by aligning to the more recent legislation in the energy field (in particular Clean Energy Package) and further promoting competition and market integration. In addition, more could be done to align to more recent legislation in the sphere of environmental protection (including climate action) (in particular legislation adopted under the Green Deal, the Circular Economy Package, the Clean Mobility Package).

It is very difficult to measure whether the redistribution of costs inherent in the reductions to Energy Intensive Users (EIUs) from energy charges really increases the acceptability of the underlying policy from the perspective of public opinion. Furthermore, the correlation between the existence of EIU reductions and the introduction of ambitious renewables policies is uncertain.

There are some indications that the compatibility rules on environmental protection are not entirely suited to face the climate neutrality challenge, in particular the rules to ensure necessity of aid, proportionality and limitation of distortions. Allowing for other types of aid that have potentially a stronger impact on competition raises the question of how that stronger impact can be mitigated and how the conditions of the necessity of the aid, the proportionality and the limitations of competition distortions can be verified. This relates in particular to industrial decarbonisation.

There are indications that the scope of the guidelines might have been too restricted and that the current guidelines are too tightly focused on specific aid categories and technologies. They are thus not sufficiently future-proof, to cater for recent and expected technological and market developments and novel aid designs.

The assessment suggests that the EEAG and corresponding GBER rules have generally delivered on their objectives. They already explicitly support the Union's environmental and sustainable energy policy objectives while at the same time ensuring an effective and efficient State aid control. However, some limitations and problems have become visible.

Possible action: Amendment of the Aviation Guidelines in the medium term, also in the light of the impact of the ongoing COVID-19 pandemic

The full impact of the COVID-19 outbreak is not yet known. However, there are already indications that the aviation sector is one of the most heavily affected sectors by the pandemic. While the impact of the COVID-19 pandemic had not been assessed in the Aviation external study, the International Air Transport Association predicts that the air passenger traffic will go back to its pre-COVID-19 levels by 2023. Therefore, the conclusions of the study (and from the assessment) should be deemed to still be valid in three years’ time. However, any possible revision of the Aviation Guidelines will need to take account of the changes in the aviation sector created by the COVID-19 pandemic.

The evaluation has revealed the need for an update and further clarification of the rules under the Aviation Guidelines and the relevant GBER provisions.

Moreover, there might be a need to better align provisions governing investment and operating aid to airports. The Aviation Guidelines furthermore do not specifically address measures to mitigate the airports’ impact on the environment and the climate. Therefore, the Aviation Guidelines may need to be amended in that regard.

It also appears from the assessment that aid to regional airports below 500,000 passengers per year has usually a limited effect on competition, although it needs to be notified to the Commission. Therefore, reflection is needed how to further simplify rules for aid to that category of regional airports to allow the Commission to focus its State aid control on the potentially most distortive cases.

As the assessment suggests, the transitional period allowing operating aid under the Aviation Guidelines does not seem to be sufficient for many regional airports to become cost covering by 2024. In particular, many airports below 1 million passengers per year will continue to need operating aid after 2024. In addition, there seems to be a structural need for operating aid for airports with less than 200,000 passengers per year, currently covered by the GBER. Therefore, it may be necessary to prolong the transitional period beyond 2024.

While air passenger transport can stimulate local economies and have important effects on overall connectivity of a given region, the assessment indicates that aid to airports might not always be the most efficient use of public resources to promote regional development.

Possible action: Amendment of the Risk Finance Guidelines in the short term, also in the light of new Commission priorities

Finally, enabling access to finance should also be seen as an enabler in light of the investments required for the Green Deal, Industrial Strategy and the digital transformation.

The evaluation has also shown that, while there is an overall coherence between GBER, Risk Finance Guidelines and other rules, namely those governing centrally managed funds, there is room for further aligning the definitions within the Risk Finance Guidelines to those used elsewhere, where it is possible without significant changes to the scope of the rules as they stand.

In addition, the evaluation has shown that the Risk Finance Guidelines may benefit from some structural improvements that would increase readability and ease of application. In particular, while the evaluation has shown that the basic principle of the Risk Finance Guidelines to require an ex ante assessment to proof a specific market failure that should be addressed by a national measure works overall well, the content of the Risk Finance Guidelines on this issue is sometimes perceived as overly complex by some Member States. Without changing the material requirements as such, a possible improvement could be made by consolidating all requirements linked to the ex ante assessment and streamlining the specific content and level of evidence needed in different cases.

As regards the Risk Finance Guidelines, they follow closely the logic of Article 21 GBER, as they account for additional measures beyond what is block exempted. Therefore, the possible improvements identified above should be considered in parallel for both legal instruments at the same time.

Furthermore, additional minor clarifications could be made in relation to the calculation of thresholds and the requirements for the use of national promotional banks as financial intermediaries. The structure and readability of the text could be improved without any changes in substance.

Third, the evaluation has shown that the requirement for private co-investments pursuant to Article 21(10) GBER is difficult to achieve in certain Member States that suffer particularly from weak private investment markets. At the same time, the evaluation has confirmed the importance of that requirement to ensure crowding-in as well as adequate due diligence for investment decisions. An improvement of the rules could therefore be to adjust the level of private participation for those areas where financial markets are particularly underdeveloped, without changing the principle of private participation requirements as such. Any such adjustment should be limited to those areas where private risk capital is particularly scarce. Since Member States apply GBER directly with no ex-ante compatibility assessment by the Commission, those criteria should be direct and easy to consult and apply, to avoid legal uncertainty. In that regard, several articles of the GBER outside those addressing regional aid, use the “assisted region” definition to soften the aid conditions.

Second, the current rules provide in Article 21(5)(b) GBER the possibility to support SMEs that extend their business. The evaluation has shown that the corresponding eligibility criterion, which limits aid to undertakings to those entering a new "product or geographic market" may sometimes cause issues in practice. The reason is that it may be difficult to define a relevant product or geographic market with sufficient certainty. The legal risk associated is that a market definition that would not be upheld in court could lead to aid becoming declared illegal. Detaching the possibility to provide risk finance aid from the definition of a specific market, while still focussing on the actual underlying market failure, could lead to an improvement of the rules by simplifying application and eliminating legal risks for Member States and beneficiaries.

First, the assessment indicates that it is sometimes difficult to identify with sufficient precision the date of the "first commercial sale", which is the baseline for the age requirement under Article 21(5)(a) GBER, allowing aided risk finance investments only up to 7 years after that date. It should also be noted that this provision is different from Article 22(2) GBER, which defines age related eligibility based on the "registration of the company". An alignment of those relevant points in time, with a potentially corresponding adjustment of the age threshold to ensure that the eligibility criteria are not substantially altered, could simplify application of the rules in practice, without changing the focus of the rule on young SMEs.

The assessment suggests that the SME access to finance rules are overall fit for purpose. However, specific areas have been identified where improvements could be made to increase efficiency in application by Member States and beneficiaries without jeopardising the goal to protect the level playing field and minimise potential market distortions. The following areas identified in the Risk Finance Guidelines could be further improved.

Possible action: Amendment of the IPCEI Communication in the short term, also in the light of new Commission priorities

·The IPCEI Communication does not fully reflect recent EU policy developments, in particular the Industrial/SME Strategy. It may therefore need to be updated with references to more recent relevant initiatives.

·While participation of SMEs was registered in both the R&I integrated IPCEIs approved since 2014, the rules of the IPCEI Communication do not, in themselves, address the specific situation of SMEs. In view of the special role that they play in the EU economy, and considering that State aid to SMEs is less likely to distort competition and affect trade between Member States, it may be appropriate to facilitate SMEs’ participation in IPCEIs, in line with what the Commission advocated in its SME Strategy. This appears to be even more crucial in the current circumstances, in which the difficulties such undertakings face to access financing on the market in general have been exacerbated. The existing eligibility requirements (e.g., minimum number of Member States for a project to qualify as an IPCEI) and positive indicators (e.g., openness of the IPCEI and co-financing by a Union fund) are not sufficient to ensure that IPCEIs always have a truly European character. It may therefore be necessary to enhance IPCEIs’ European character by slightly increasing the minimum number of participating Member States and providing for additional openness. This appears especially important in the current circumstances, as it may contribute to ensuring that the EU economy collectively and inclusively recovers from the COVID-19 crisis. To attain the same objective of reinforcing the European character of IPCEIs, and to ensure consistency with the EU cohesion policy, it may also be appropriate to clarify the Commission’s treatment of clauses conditioning the granting of aid upon the relocation of the beneficiary’s activities from a country in the EEA to the territory of the aid granting Member State.

·The IPCEI Communication may not provide full certainty with regard to certain situations that are currently not regulated by the Communication (e.g., the accession of Member States to an already approved and functioning IPCEI). The rules applicable to such situations may therefore need to be clarified to guarantee a sufficient level of legal certainty, on the basis of the experience gained in individual cases.

·Certain notions referred to in the IPCEI Communication (e.g. on first industrial deployment, spillover effects, integrated projects) do not seem still sufficiently clear on the basis of both the results of the public and targeted consultations and case practice. Therefore, it may be appropriate to remove the identified uncertainties by codifying the Commission’s interpretation of those notions, as applied in approved and ongoing cases in the area of research and innovation.

At the same time, however, the assessment revealed that limited amendments or updates may be necessary to ensure that the rules are operational and fully fit to respond to current and future challenges. This is even more crucial in view of the important role that the IPCEI instrument may play in the post-COVID-19 recovery, as well as in the transition towards a greener, digital and more resilient economy. In particular:

As the assessment in Section 5 and Annex 8 suggests, the IPCEI Communication proved to be an appropriate instrument to achieve the objectives of SAM and facilitate the emergence of important cross-border, integrated and collaborative projects in strategic value chains, which promote the common European interest. In that respect, the replacement of the previous, sector-specific rules for the assessment of IPCEIs with dedicated and cross-disciplinary guidance, appears to have attained its objectives of clarifying the criteria for the eligibility and compatibility of IPCEI State aid and enhancing the predictability of the Commission’s assessment. The creation of cross-sectorial rules also allowed for an increased level of consistency of the Commission’s action and enabled the rules to respond to different types of technological and societal challenges, including in the area of environmental protection and climate change. It also provided for a more coherent approach with important EU policy objectives such as on innovation, key enabling technologies, sustainability and strategic value chains.

The importance of addressing these findings is even more critical now, in view of facilitating European recovery from the health and economic crisis caused by the COVID-19 outbreak.

·According to the indications in Section 5 and Annex 8, a very limited number of provisions cause a disproportionate administrative burden (e.g., the notion of ancillary economic activities included in the RDI Framework, and the current rules on how to calculate indirect eligible costs of R&D projects). It is therefore necessary to clarify and simplify the practical application of those provisions.

·Introduce a limited number of technical definitions (digital infrastructures, technology infrastructures) and compatibility criteria for the assessment of investment aid for the development of such infrastructures reflecting market and technology evolution and for RDI investments necessary to deliver the twin green and digital transition, especially of SMEs;

·Simplify the text (without changing substance) of certain provisions (i.e., on innovation clusters), streamline existing formulations, and clarify the definition of experimental development to explicitly refer to digital transition, in a way that allows reducing administrative burden while facilitating investments into RDI.

At the same time, however, the evidence base indicate that certain State aid rules on RDI are not sufficiently clear and relevant and some targeted adaptations, including in relation to subsequent and on-going technological and digital developments, may be needed. New current Commission strategic priorities need also to be taken into account, such as the Green Deal, the Digital and Industrial Strategies and the economic recovery.

Overall, the principles covered by the RDI Framework and the relevant RDI sections of the GBER continue to remain relevant and flexible enough to accommodate changing economic circumstances and technological developments, provide the incentives to invest in RDI contributing to growth in the EU’s Single Market based on world leading research and technologies. Moreover, the evaluation did not identify evidence suggesting that State aid provided under the evaluated RDI measures had any material negative impact on competition or crowded-out private investments.

Based on the assessment in Section 5 and Annex 8, it appears that the State aid rules for RDI rather worked well and contribute to promoting RDI activities in the EU without unduly distorting competition and do not hamper support for R&D and innovation related activities.

Possible action: Amendment of the RAG in the short term, also in light of the new Commission priorities

As regards the sectoral exclusions from regional aid rules, reflection might be needed whether those presumed over-capacities still exist and hence whether the sectoral exclusions are still justified.

The current restrictions to the eligibility of investments by large enterprises in c-regions (in particular related to new process innovation) appear to be often unclear and causing legal uncertainty. The provisions on aid granting to diversification investments of large enterprises in c-areas result in heavy administrative burden for both Member States and the Commission, while the notified aid amounts are frequently relatively small and cases are often withdrawn. Those specific provisions appear to be ineffective and inefficient and there might be a need to change or remove them.

Overall, the regional aid maps, as designed, seem to work well and contribute to the cohesion objectives. However, additional reflections on the current methodology for the design of the maps may include the level of flexibility for Member States to respond to economic developments that are reflected in the economic data of Member States on GDP and unemployment. While regional development and cohesion are the main objectives of the Regional aid Guidelines, recent policy developments, such as the Green Deal, the Digital and Industrial Strategies should also be reflected in the future rules. Although it is too early to estimate the medium and long-term consequences of the COVID-19 pandemic, regional aid will remain relevant to provide investment opportunities in the future and to support the economic recovery of disadvantaged regions in the EU.

In general, the results show a need for simplification and clarification of the existing provisions. This refers in general to the overall design of the rules, but also to the harmonisation of existing definitions (Regional aid Guidelines vs GBER) and for example excluded sectors and other concepts such as relocation.

The de minimis Regulation remains an integral part of the SAM architecture. However, the assessment suggests that the current rules may not reflect the impact of the economic development. In particular, the de minimis ceiling may need to be adapted (e.g. by taken into account the inflation in the internal market). The Regulation could also benefit from clarification and simplification, in particular with regard to financial instruments to increase their use. Finally, the requirements on monitoring could be reviewed given the flaws of the current dual system (registers or self-declarations).

Possible action: Amendment of the GBER in the short term to mirror the changes in the relevant soft law instruments also in light of the new Commission priorities. Amendment of the GBER in the medium term to allow for further streamlining.

As to the specific provisions, the evaluation revealed that clarifications/adjustments of certain GBER provisions are needed. Moreover, hand-in-hand with the relevant guidelines/framework, certain aspects of the GBER is not up-to-date and more recent policy/legislative as well as technological/market developments and deployment have to be reflected. In order to ensure that all the GBER provisions become relevant and coherent, they may need to be amended.

For the individual rules the assessment in Section 5 and Annex 8 identified changes needed to a different degree on different aspects. The following section has to be read in conjunction with Annex 8.

Overall, it appears necessary to make the expected use of evaluation results more clear in the rules, as well as to accompany them by support activities to promote the use evaluation results in the decision-making process, especially in Member States where the institutionalisation of evaluation is weaker.

The current practice focuses on the final evaluation report, which should be submitted to the Commission six months before the end of the scheme at the latest. Although interim reports are a common practice, there is no binding requirement to produce them. A more systematic use of those tools may be beneficial to gather early information on the effectiveness of the schemes and assess data quality.

Ensuring and maintaining high-quality ex-post evaluations is a necessary precondition to using the evaluation findings in the decision-making process. In pursuing the extension of the evaluation coverage and the reinforcement of the methodological orientations, an ‘incremental’ approach and keeping a right balance between existing and new rules seems to be adequate. It appears to be necessary that the evaluation coverage reach some additional Member States and schemes, keeping at the same time the number of additional evaluations manageable by both the Commission and Member States. The range of accepted methodologies for impact evaluation could be broadened, but such expansions should follow clear and strict standards to preserve the current quality.

Internal analyses on the available data on delayed reporting show that the timeliness of reporting is essentially driven by the behaviour of a very small number of awarding bodies in each Member State. In the future, a radical improvement in the timeliness of reporting could be achieved by targeting and training those few organisations that report belatedly. However, timeliness may not necessarily solve the issue of potential mistakes, which seem to be at least partially driven by the complex operations necessary to assess the cumulation of aid to verify whether the transparency threshold of EUR 500,000 is met. While it may increase the total volume of reporting, that source of error may be eliminated by requesting the reporting on all the disbursed State aid irrespective of the amount.

A regards transparency, limited and potentially flawed data that vary between Member States appear to undermine the purpose of the transparency requirements. Given the findings of the present Fitness Check, there seems to be a clear need for more complete and better information as well as increased legal certainty, while reducing or at least not increasing administrative burden for Member States.

The non-legislative elements of SAM (monitoring, transparency, evaluation, as well as advocacy and the partnership with Member States) remain important building blocks of the current State aid system.

In addition, the present Fitness Check identified that SAM as a system would generally benefit from clarifications, further streamlining and simplification of certain rules, and thereby also contribute to the reduction of administrative burden and to overall objective of faster access to aid.

The analysis is Section 5 suggests that SAM as a whole is broadly fit for purpose and hence there is no need for an overhaul. The GBER remains the main building block of the SAM architecture. While there might still be scope for a further increase of expenditure under the current block-exemption rules in the coming years, in line with the approach to focus on cases with a big impact on competition, the current system also ensures that the Commission keeps examining a limited number of measures which have to be notified involving large amounts.

In order to evaluate the EU added value of the State aid rules subject to the current Fitness Check, stakeholders were asked whether the State aid rules in question helped to deliver EU policies more efficiently. The overwhelming majority of respondents said yes (92% for all respondents; 93% for public authorities), fully or at least partially.

In addition, the existence of State aid guidelines and frameworks allow Member States and potential beneficiaries to know ex-ante the rules that the Commission will use to assess the compatibility with the internal market of the aid schemes notified by Member States. This guarantees predictability and increases the legal certainty of the system. At the same time, the GBER allows for implementation of schemes without notification and de minimis Regulation sets out the conditions under which aid amounts are considered not to distort competition and affect trade. The existence of State aid rules also contributes to the convergence of State aid measure across different Member States and hence delivers on the objective of a level playing field.

In the absence of State aid guidelines, frameworks and regulations, all planned State aid measures would have to be notified to the Commission individually by Member States and the Commission would have to assess them directly under Article 107 TFEU and take individual decisions on each of them. The mere existence of such State aid rules thus intrinsically reduces administrative burden.

As explained above in Section 2.1, the provisions on State aid, as part of competition policy, are enshrined in the Treaty. Competition policy represents an area of exclusive EU competence pursuant to Article 3(b) TFEU and therefore the subsidiarity principle does not apply. The State aid rules covered by the current Fitness Check are Commission regulations and guidelines/frameworks (soft law) in the field of State aid law, an area where the TFEU gives the Union exclusive competence. Only the EU can/must act in this area.

The findings of the analysis on EU added value are subject to the limitations stemming from the stakeholder consultation and constraints on the possibility of full triangulation.

Overall the existence of the State aid rules evaluated under the Fitness Check has a clear EU added value that is acknowledged by stakeholders as it brings similarities in the design of Member States compensation schemes, reduces administrative costs and provides clarity, stability and predictability.

What is the additional value resulting from the fact that the Commission has adopted the State aid rules covered by the Fitness Check, compared to what could have resulted from a case-by-case assessment of the notified State aid measures?

In order to reduce competition distortions caused by subsidies globally, EU is advocating for improved international rules on industrial subsidies. It is important to ensure continued coherence between EU’s internal State aid rules and EU’s external efforts in promoting stricter international subsidy rules.

In addition to the EEAG and related GBER provisions, the Green Deal will affect a series of other State aid rules. Regional aid for instance will play a major role in the implementation of the Green Deal Investment Plan. At the same time, as acknowledged by the Green Deal Investment Plan, the cohesion objective must be respected.

As mentioned above, the recent Industrial Strategy package, which includes the new Industrial Strategy and the SME Strategy, aims at maintaining European industry's global competitiveness and a level playing field at home and globally, making Europe climate-neutral by 2050 and shaping Europe's digital future. One of the numerous actions to deliver those objectives is to have revised State aid rules in place in 2021 in a number of priority areas, including energy and environmental aid as well as IPCEIs.

The Green Deal Communication also emphasises the need for preserving and restoring ecosystems and biodiversity, and nature and biodiversity is a priority under the European Green Deal Investment Plan. While currently the State aid measures in that context have been treated under several rules, the revision process may need to further reflect a more coherent State aid approach among different types of beneficiaries, also to cover the latest policy developments, such as for instance the EU Biodiversity Strategy. Coherency between various objectives will need to be ensured.

The Green Deal and follow-up actions are of particular relevance for the EEAG and related GBER provisions. It also has to be noted that the Commission has already set recently out a vision of how to achieve climate neutrality by 2050 . The Commission has also put forward a proposal for a European Climate Law that would enshrine the 2050 climate neutrality objective in legislation. Other recent and new regulatory developments relevant to the EEAG and relevant GBER provisions are the Clean Energy Package, Clean Mobility Package, the Circular Economy Package and the forthcoming 2030 Climate Target Plan. Under the Green Deal and the new Industrial Strategy, the EU will have to convert its linear economy to a more circular economy. This will require many transformations and the current State aid rules may be insufficient in particular for the higher challenge of the circular economy. The need to reflect objectives linked to the circular economy in the context of the forthcoming revision of State aid rules has been further recognised in the Circular Economy Action Plan.

In particular, the Communication on the Green Deal Investment Plan indicates that the relevant State aid rules will be revised by 2021 in light of the policy objectives of the Green Deal and support a cost-effective and socially-inclusive transition to climate neutrality by 2050. State aid rules will have to provide a clear, fully updated and fit-for-purpose enabling framework for public authorities to reach Green Deal objectives, while making the most efficient use of limited public funds. State aid rules will support the transition by fostering the right types of investment and aid amounts. In this respect, in line with the European Green Deal Investment Plan, the Commission will explore how the EU taxonomy can be used. State aid rules will encourage innovation and the deployment of new, climate-friendly technology at market scale. As also indicated by the Communication on the Green Deal Investment Plan, as part of this, the Commission will also consider further procedural facilitation to approve State aid for just transition regions. They will also facilitate the phasing out of fossil fuels, in particular those that are most polluting, thus ensuring a level-playing field in the internal market.

As regards recent policy development, the Green Deal outlining the policies to achieve climate-neutrality in Europe by 2050 and to tackle environmental-related challenges is one of the key priorities of the current Commission. Competition policy, and State aid rules in particular, have an important role to play in enabling Europe to fulfil its Green Deal and Just Transition objectives. The State aid rules will have to accompany the new Green Deal in all its facets, including its ambitious new emissions targets. While the State aid rules have to support the Green Deal objectives, they will also, at the same time, have to preserve their main objectives, mainly the integrity of the internal market.

Overall, stakeholders in the public consultation took the view that the State aid rules under the Fitness Check are coherent with changes in EU legislation, at least to a certain extent. As to the question to what extent the State aid rules subject to the current Fitness Check are coherent with changes in EU legislation which have occurred since the State aid rules were adopted, the majority of respondents to the public consultation stated that they are coherent with changes in EU legislation, fully or partially, with regard to all rules. Despite the fact that the public consultation predates the current Commission and its priorities, stakeholders emphasised climate neutrality and for instance stressed that State aid has to “enabling Member states with better tools to combat climate change, including improving the public financing tools at a level necessary for enabling the transition of the fossil fuels based industry towards more climate friendly technologies”.

In addition, as also emphasised in Section 4.1 and Section 5.3, the public consultation as well as the targeted consultations took place before the announcement of Commission’s recent policy strategies, such the Green Deal, the Digital or Industrial Strategies, although some comments/position papers were received thereafter. The consultations took place well before the COVID-19 crisis. Hence, not all recent legislative developments were perhaps fully visible to stakeholders.

Whether the State aid rules covered by the Fitness Check are coherent with other EU policies/legislation, has to be seen in the context of the new Commission priorities for 2019-24, see also Section 3.3, in particular the Green Deal, as well as the Digital and Industrial Strategies. The findings in this section might slightly overlap with the above question of “how well do the objectives of the individual State aid rules under the Fitness Check still correspond to the needs within the EU”, since both are marked by recent policy developments. This section focuses mainly on the impact of the recent Green Deal and the Industrial/SME Strategy on the overall SAM rules, while a more detailed assessment of the individual rules can be found in Annex 8.

The analysis suggests that the State aid rules under the Fitness Check are to a certain extent coherent with other EU policies and legislation. It appears however that the rules do not always reflect more recent legislative developments after their adoption. New EU policies and legislation stemming from the Commission’s priorities, in particular the Green Deal and the Digital and Industrial Strategies, are not mirrored/implemented yet.

Finally, as regards the SAM transparency obligations, despite the steady growth in the number of aid awards reported in the TAM since 2016 (around 70,000 as of December 2019), the requirements were introduced in different waves between 2014 and 2016 and are therefore currently not harmonised across the various legal bases. Thus, their application remains uneven across the whole State aid “spectrum”.

Moreover, as regards the SAM requirement for ex-post evaluation of the implemented national measures, the formulation of the requirement differs between the GBER and guidelines/frameworks, which leads to potential uncertainties in the implementation. In particular, while GBER provides for an automatism (ex-post evaluation is required for all GBER schemes in the relevant fields, which have an average annual budget above EUR 150 million), the SAM Guidelines/Frameworks call for additional interactions between the Commission and Member States, since they require the Commission to request the ex-post evaluation of “large or novel aid schemes”. In addition, the GBER does not make any direct reference to the use of evaluation results, while the relevant Guidelines stipulate that the evaluation report must be submitted to the Commission in due time to allow for the assessment of the possible prolongation of the aid scheme, and that any subsequent aid measure with a similar objective must take into account the results of the ex-post evaluation. The requirement for ex-post evaluation of the implemented national measures would therefore benefit from further harmonisation across GBER and Guidelines/Frameworks, especially as regards a common threshold and the use of ex-post evaluation results.

The Railway Guidelines and the STEC were adopted before the completion of the State aid modernisation and as such before the common principles were identified. Therefore, they are not fully aligned with the SAM common objectives. Moreover, in the case of the Railway Guidelines, which were adopted in 2008 (i.e. six years before the SAM package entered into force), in point 33 a series of State aid rules are referred to that in the meanwhile have been either repealed or significantly modified. Therefore, coherence between the provisions of the Railway Guidelines and the other State aid rules has been fading.

As described in detail in Section 2.2, the rules adopted under SAM included so-called common principles. Identification and definition of those common principles was one of the main requirements of the SAM Communication and each of the SAM rules then included a section setting out both those general principles common to all rules and their application in their specific context. The common principles apply to the assessment of compatibility of the aid measures by the Commission in line with the SAM objective to foster “good aid”.

67% of all respondents (70% of public authorities) replied that the rules are partially coherent with each other. Those respondents mainly highlighted some smaller inconsistencies in the definitions in the GBER as opposed to the relevant corresponding guidelines. “There is a need for the consistency of terminology and text across all of the State aid rules.” “The linkage between EEAG and the related GBER provisions could be stronger.”

The public consultation supports that finding. Overall, the majority of respondents to the public consultation took the view that that the State aid rules subject to the current Fitness Check are coherent with each other, fully or partially (86 or 92% for all respondents; 40 or 100% for public authorities). Only 9% of the respondents (and more importantly, none of the public authorities) are of the view that the rules are not at all coherent with each other).

The Commission’s case practice confirms that the rules are overall coherent with each other, although some technical alignments might be necessary. By way of example, Article 4(w) GBER sets the notification threshold for investment aid for the district heating or cooling distribution network at EUR 20 million per undertaking per investment project, while in the EEAG that threshold is EUR 15 million. Furthermore, pursuant to Article 44(2) GBER, beneficiaries of aid in the form of reductions in environmental taxes must be selected on the basis of transparent and objective criteria, while the EEAG (paragraph 173) also requires that it is done on a non-discriminatory basis. As regards the Risk Finance Guidelines, eligible undertakings under Article 21(5)(b) GBER are limited to SME that have been operating for less than 7 years following the "first commercial sale", while start-up aid under Article 22(2) GBER uses an age definition based on the registration of the undertaking.

The analysis suggests that the SAM rules form a rather coherent package, albeit some technical alignments may be necessary. Certain SAM provisions, such as on the requirement for transparency and ex-post evaluation of the implemented national measures slightly diverge. The Railway Guidelines and STEC, which predate the reform, should be adapted to SAM.

The findings of the analysis on coherence are subject to the limitations stemming from the stakeholder consultation and constraints on the possibility of full triangulation.

This section evaluates the coherence of State aid rules under the Fitness Check. In a first step, it examines the so-called “internal” coherence, that is to say whether the State aid rules under the Fitness Check are coherent with each other. In a second step, it examines the “external” coherence, i.e. say whether the State aid rules under the Fitness Check are coherent with other EU/policies/legislation.

As regards international rules, the EU is attached to a rigorous application of the WTO subsidy rules. At the same time, operations involving companies benefiting from third country subsidies or State support may cause distortions in the European internal market. On 17 June 2020, the Commission has adopted a White Paper, in which it presents possible ways to address such distortions.

Stakeholders also emphasised that State aid should take into account more international dimensions and global competition, for instance “European companies increasingly have to compete with non-European companies that gain benefit from low-cost government funding solutions in their home countries.“ Point 34 of the IPCEI Communication and point 92 of the RDI Framework are areas, where this concern by stakeholders is reflected. The so-called “matching clause” (see Section 5.1.1. and Annex 8) allows the Commission to take account of the fact that, directly or indirectly, competitors located outside the Union have received or are going to receive, aid and enables Member States to provide the Commission with information to enable it to assess the situation, where possible. In the alternative, the Commission may also base its decision to apply the matching clause on circumstantial evidence. The consultations revealed that stakeholders find it impossible to apply the matching clause in practice due to the lack of transparency in the granting of subsidies by third countries. While it is true that the matching clause has never been used in practice, it should also be noted that no Member State has ever invoked its application.

Overall, the State aid rules for RDI are well adapted to subsequent market developments and technological advances, and the objectives set by the evaluated measures covered by those rules correspond to the market needs faced by companies operating in the EU. However, there remain specific industry needs, which according to the results of the current Fitness Check are unaddressed or insufficiently addressed by the current rules (see Annex 8).

With regard to certain rules, such as STEC and de minimis Regulation, certain economic developments such as for instance inflation or GDP growth in the internal market are not reflected (see Annex 8).

The Railway Guidelines date back to 2008. The ongoing development of the rail freight market calls for more flexibility with regard to scope, which is limited to the railway undertakings only, also to multimodal operators and logistics companies other than “railway undertakings”. In particular, the Commission’s case practice also points to the need of specific rules for the financing of the start-up phase of new freight services. Some other cases, where the Commission’s assessment refers to the criteria set out under Chapter 6.1 of the Railway Guidelines, similarly point to the need for specific rules for the financing of infrastructure serving combined transport operations (see Annex 8).

Another evolving sector are is aviation. In particular in the area of airport-airline agreements, case practice has shown that the market is evolving quickly. Moreover, the number of airport networks is growing. At present, the Aviation Guidelines do not contain any explanations on how to apply the current State aid rules to airport networks. The results from the targeted consultation point towards the fact that there might be a need for further clarifications or an adaptation of the rules in that regard. Finally, the transitional period for operating aid for airports does not correspond to the current market realities. Due to increasing security costs, the consolidation of the airline market, and recent bankruptcies of airlines, many airports expect to continue to need operating aid after 2024. Furthermore, the Aviation external study has outlined a structural need for operating aid for airports with less than 200,000 passengers p.a. and predicts only very little growth potential for those below 700,000 passengers p.a. (See Annex 8).

The positive feedback from the public consultation on the capability of the IPCEI Communication to address recent technological or market developments is also confirmed by experience in cases, suggesting that the IPCEI Communication is sufficiently flexible in allowing to adapt to the different technologies or activities that have formed or may form in the future the subject of the proposed projects. On the one hand, both the integrated projects approved so far concern RDI and First Industrial Deployment (“FID”) activities, on the other, the report of the Strategic Forum for IPCEI clearly suggest that the IPCEI Communication is regarded as a relevant instrument to also address market failures in areas other than RDI (e.g. environmental protection, mobility etc.; see also Annex 8).

In relation to the regional aid rules, while the main overall objective of regional aid is “horizontal”, i.e. to contribute to the implementation of the cohesion objectives, in a steadily changing business environment the framework needs to respond to new developments (for example to the transformation of the automotive sector or the rise of new technologies). Continuous development of the European business environment requires regular adaptations of the regional aid rules. Living in a globalised world, more and more companies from third countries are seeking for constant market development and international expansion. While the results of the RAF external study provide only limited evidence on the relationship between maximum aid intensities and worldwide foreign direct investment and could not clearly confirm a clear connection, it is clear that European regions will be more and more in competition with third countries and additional efforts on that aspect will be required in order to maintain a level playing field also on a global base. Finally, the rules on sector exclusion are subject to changes in particular related to over capacities and the results of the targeted consultation confirm a necessary re-assessment of the synthetic fibres and shipbuilding sectors due to changed market conditions related to overcapacity. Recent policy initiatives such as the Green Deal, the Digital and Industrial Strategies, require the framework also to be adjusted and provide additional opportunities for private investments to achieve the policy objectives. Although it is too early to estimate the long-term consequences of the COVID-19 outbreak, regional aid will also remain relevant to provide investment opportunities in the future and by providing investment opportunities for the economic recovery of disadvantaged regions in the EU. (See also Annex 8).

Stakeholders to the EEAG targeted consultation took the view that zero subsidy bids and low or zero emissions vehicles should be better reflected in the new rules, alongside new technologies such as hydrogen, synthetic fuels and low carbon gas (51%) and storage (39%). Some stakeholders claim that given the rapid technological changes and market evolution in the sector, it is important that the guidelines remain flexible enough to accommodate future evolutions. (See also Annex 8).

In addition, the scope of the EEAG is limited to a list of 14 specific aid measures often linked to a specific technology or method to achieve environmental protection. The EEAG therefore present the risk of not being able to deal with new types of measures or technologies that cannot be therefore assessed under the current guidelines. This happens for example when a Member State wants to achieve an overarching common objective (e.g. to reduce Greenhouse Gas, “GHG”, emissions) by putting different technologies (e.g. renewable energy, energy efficiency, electricity storage, carbon capture storage and/or use, electrification, and green hydrogen projects) into competition. Some of the technologies, while contributing to the GHG emission reduction fall outside the scope of the EEAG (for example hydrogen) or could potentially fall under a category of aid measures that target a totally different objective (storage could potentially be covered by the generation adequacy provisions but the compatibility conditions are not suitable for a an aid scheme in which storage competes with other low carbon technologies with the objective of reducing emissions instead of securing generation adequacy).

With regard to the specific rules, the EEAG/relevant GBER provisions should better cater for new developments in solutions and technologies and in the market. Technology and markets evolve very rapidly in that sector, making some of the rules outdated or insufficient to cater for new developments in the field. This starts to show in case practice. For instance support for low emission mobility infrastructure normally does not fall in the scope of the EEAG and the GBER (when the infrastructure is not for own use) although support for the deployment of such infrastructure pursues a clear environmental objective. Support schemes for such infrastructure are increasingly put in place by Member States. They were assessed under the Treaty. In order to test the relevance of the EEAG and the GBER with respect to low emission mobility infrastructure and in particular verify whether the developments in this filed would show that the absence of compatibility conditions in the EEAG and/or the GBER would actually constitute a gap, the Commission verified under the EEAG external study how schemes in that field had been implemented and whether projects deployed outside approved schemes had been deployed without any public support (see below sub-section on low emission mobility).

In their qualitative replies, stakeholders emphasised that State aid rules could be better adapted to on-going global challenges, in particular, climate change, as well as the digital single market: “EU state-aid rules should be further optimised based on experience with the existing rules to enable the Member States to implement ambitious energy, environmental and climate policies that are in Europe’s interest as doing so requires greater public investment to be made.” “Considering the manifold and major new challenges arising from the changes happening in the global economy and the climate targets, […] there is room for further improvements of the state-aid rules.” “The revised GBER also needs to better take account of technological progress, the increasing importance of the energy sector, and the necessary efforts for mitigating climate change. The current version of GBER does not sufficiently address the issues of eMobility, sustainable and innovative types of energy (including hydrogen), or energy efficiency.” “State aid rules should be better adapted to developments in the digital single market.”

Stakeholders in the public consultation agreed that the State aid rules under the Fitness Check are at least partially adapted to recent developments in markets and technology. While only a relatively small part of respondents consider the rules fully adapted (between 7% to 33%, depending on the rule), for a large majority (53% to 82%, depending on the rule), they are partially adapted. Only 7-17% of respondents, depending on the rule were of the view that the State aid rules are not at all adapted to recent developments in markets and technology, see also in detail Annex 2. The only exception are the Aviation rules, where 33% of all respondents (11% of public authorities found, that the rules are not at all adapted.

As described in Section 2.1, State aid rules are complex and encompass both horizontal and more sector-focused rules. When assessing how adapted the rules are to market developments and technological advances, the main focus is on rules which have a sectoral focus or a very specific sectoral objective and this SWD will use some selected examples which merit closer attention.

The analysis suggests that the State aid rules under the Fitness Check are to a certain extent adapted to subsequent market developments and technological advances, but further adaptation in specific areas and a certain degree of flexibility may be needed in the future, depending on the specific rule.

As explained in Section 3.4, the present Fitness Check does not evaluate the effects of the Temporary Framework or the effects of the COVID-19 crisis on the rules subject to the Fitness Check, given that those developments are very recent and their duration and impact cannot be predicted at the current stage. However, in the mid- to long-term, future State aid policy actions will have to take into account all the potential impact of the uncertainties brought by the COVID-19 crisis and the measures undertaken by the Commission on the State aid rules in general, and on the SAM objectives in particular.

The objectives of the Railway Guidelines, that is to say supporting railway liberalisation and encouraging the modal shift from road to rail, remain fully relevant and even reinforced by the recent Green Deal. However, the Railway Guidelines predate the most recent 4th railway package (2016), which will complete the liberalisation of the rail sector.

The State aid rules for RDI maintain their central importance for the achievement of the objectives of key Commission policy initiatives, such as the Green Deal, the Digital and Industrial Strategies. As stated in the Green Deal Communication, “new technologies, sustainable solutions and disruptive innovation are critical to achieve the objectives of the European Green Deal”, i.e. to enable a shift towards a climate neutral economy, halt biodiversity loss, decouple economic growth from resource use and tackle pollution. The centrality of research and development to achieve the objective of transforming the EU industry into a more green and circular – and yet competitive – one is also recognised in the Industrial Strategy communication. Considering the significant public and private investments that will be necessary to achieve the ambitious goal of making Europe “the first climate-neutral continent by 2050” and ensuring that natural capital is enhanced and the well-being of citizens protected from environment-related risks, targeted and time-bound State aid for RDI activities may play an important role to allow research and development into new and breakthrough, greener technologies and production processes and solutions including social innovation and nature based solutions to take place to the necessary extent. Moreover, State aid in the field of RDI may be beneficial to unlock investment into innovation, in particular by SMEs, with a view to fostering the competitiveness of the EU industry and increasing the share of RDI spending by EU companies, in line with EU Industrial and SME Strategy.

As regards SMEs, the core objective of the State aid framework on SME access to finance is to address and overcome a market failure that prevents SMEs from attracting the financing required for them to grow and succeed. The analysis in Annex 8 has shown that SMEs still struggle to attract the required financing, indicating that a market gap still persists, which in turn implies that the State aid rules are still relevant as they still correspond to the SMEs’ needs. In particular, while statistical data show that access to finance for SMEs in Europe has improved between 2014 and 2018, nevertheless, despite substantial public support programmes at EU and national level, there is still an estimated gap amounted to EUR 15-25 billion in 2017 for SME debt financing alone. Taking all forms of SME financing into account, this amount is likely to be even higher. Addressing that market gap is the core objective of the State aid framework on SME access to finance. The rules therefore address an important need of European SMEs and are still relevant. This objective is also in line with the EU Industrial Strategy and the EU SME Strategy for a sustainable and digital Europe. According to the new SME Strategy, the State aid rules for risk finance should be revised, to further support SME involvement, ensure crowding-in of private investment while avoiding distortions of the level playing field.

IPCEIs are recognised by both Member States and the industry as an instrument that can play a role in the implementation of a renewed and modern industrial policy initiative, as well as in the attainment of the objectives set out in the Green Deal Communication . IPCEIs are regarded as one of the instruments to strengthen European industrial value chains through joint or well-coordinated investment and action. As also recognised by the Green Deal Communication , IPCEIs represent an important instrument to enable the shift towards a clean and truly circular economy. Furthermore, the Digital, Industrial and the SME Strategies attach a great importance to IPCEIs. According to the SME Strategy, the Commission will look to ensure that the rules encourage participation of SMEs in IPCEI. With regard to IPCEIs, the Digital Strategy suggests “to further clarify the conditions under which major Member State-led projects in key, strategic sectors for the digital and green future of Europe can proceed effectively.” According to the Industrial Strategy, IPCEIs as key in “[m]obilising private investment and public finance is acutely important where there are market failures, especially for large-scale deployment of innovative technologies”.

The EEAG, together with the relevant provisions of the GBER aimed at creating a stable and appropriate framework for public investments across the EU supporting Member States to reach their 2020 climate targets and support the Energy union while maintaining a level playing field. Those objectives do not contradict, but are rather reinforced by the Green Deal, which is however more ambitious and encompasses a full range of objectives and priorities contributing to the 2050 climate neutrality goal, circularity, biodiversity and the prevention of pollution in general.. The EEAG will also support the achievement of the objectives of the new Industrial Strategy for the green and digital transformation of the industry.

Other rules, such as the Aviation Guidelines, play also a key role in regional and social cohesion but also in regional development by improving transport connectivity. Increased connectivity of citizens and regional development remain valid EU objectives . However, the announced Green Deal and the increased focus on the aviation sector in that respect is likely to have a curbing effect on the growth/connectivity in aviation. It is thus relevant to question whether the State aid rules applying to the aviation sector need to be rebalanced between development of connectivity and sustainability.

As regards the common objectives of the specific rules, for instance, the primary objective of the RAF is the EU’s cohesion objective enshrined in the TFEU (Article 174), and that aims to strengthen economic, social and territorial cohesion by reducing disparities in the level of development between regions. Regional aid will remain also relevant in the future to contribute to new objectives, such as the sustainable green transition of the European Union that was manifested with the Green Deal Communication, published in December 2019 or to achieve the objectives of the Digital and Industrial Strategies.

In addition, stakeholders in the public consultation also confirmed that the objectives of the individual State aid rules still correspond to the current EU priorities, fully or partially. The agreement was particularly high for the RDI Framework (96% for all respondents and 100% for public authorities). On the other hand, linked to the Railway Guidelines, the agreement rate was only 82% for all respondents, although 100% for public authorities. Stakeholders noted that that the rules “should be better aligned with the EU climate and energy priorities […].” An assessment of the objectives of the individual rules in the light of current EU priorities is to be found below and in detail in Annex 8.

That question has to be also seen in the context of the new Commission priorities for 2019-24, see also Section 3.3. Stakeholders in the public consultation also underlined that “the objectives [of the existing State aid rules] […] need to be updated on the basis of the new priorities (e.g. the strengthening of the environmental sustainability objective).” At the same time, the Communication on the Green Deal Investment plan also acknowledged the link of the new priorities to State aid policy by stressing the necessity to continue effective implementation of State aid rules, which are key enablers for the transition and apply the current rules with flexibility in crucial areas for the green transition including to a climate-neutral economy.

However, concluding that the three SAM objectives still correspond to the needs within the EU does not automatically mean that the same can be concluded for the individual rules. As explained in detail in Section 2.1, State aid is intrinsically linked to overall EU policy objectives, as the compatibility grounds are laid down directly in the Treaty. In addition, the compatibility of State aid is closely linked to the common principles, according to which compatible aid must contribute to a well-defined objective of common European interest. Therefore, all the compatibility rules contain a common objective goal which are in line with EU policies. Those common objectives may however differ from rule to rule (see also Annex 5).

Many respondents explain in their qualitative replies (mainly public authorities) that the objectives of SAM remain fully relevant and in line with the Commission’s overall political objectives. In particular, reducing administrative burden for Member States and focusing the Commission’s scrutiny on cases with the biggest impact on the internal market contributes to that overall objective. “We believe that the modernisation of the rules still pursues its purpose and continues to be responsible for the EU’s priorities […].” “Robust State aid control is essential for a level playing field to ensure a well-functioning competitive internal market. [We] endorse the general objectives of the [SAM] process […]. [We] endorse the objective of focusing enforcement on cases with the biggest impact on the internal market.” “The fundamental objective of state aid law are to foster competition in the internal market and this should be in target in future as well.” The simplification aspect of SAM was underlined by respondents as a fundamental principle to deliver on other priorities. “Simplifications in the area of state aid have been and are fundamental to mitigate the inherent hardship of the transition to a climate-friendly economy.”

In addition, there seems to be a consensus among stakeholders that the SAM objectives correspond to the needs within the EU. In particular, merely 10% of the respondents who expressed a view in the public consultation stated that the objectives of SAM do not at all correspond to the current EU priorities. Among the main stakeholders of State aid control, public authorities, this is even less, amounting to 7%. As regards specifically the main building blocks of the simplification package, the GBER and the de minimis Regulation, that figure was even at around 6% for all stakeholders and merely a fraction, 2% and 3% respectively for public authorities. Those who replied to that question “partially only” mention very specific issues and refer to the State aid rules which should be better adapted to its own priorities rather than SAM not having the right objectives, for instance “increased concern for the environment” while State aid rules are perceived “too restrictive […] and hold[ing] back environmental investments”.

As also emphasised in Section 4.1, it has to be noted that the public consultation as well as the targeted consultations took place before the announcement of Commission’s recent policy strategies, such the Green Deal, the Digital or Industrial Strategies, although some comments/position papers were received afterwards. The consultations took place well before the COVID-19 crisis. Hence, possible misalignments with new general policy goals were perhaps not fully visible to stakeholders.

In particular, the recent Digital Strategy also underlines that “EU competition law serves Europe well by contributing to a level playing field where markets serve consumers.” The new Industrial Strategy also emphasises the importance of EU competition policy which “has served Europe well by helping to level the playing field, driving innovation and giving consumers more choice. Competition brings the best out of our companies and enables them to stay competitive globally. In a fast changing world, and a time when Europe is embarking on its major twin transitions, we should ensure that competition rules remain fit for today’s world.” “State aid rules ensure a level playing field within Europe, avoiding a fratricidal subsidies race while supporting important public interest objectives.” The new SME Strategy reinforces that stance from an SME perspective: “Rigorous enforcement of EU competition rules ensures that all companies active in the single market, in particular SMEs, can compete and innovate on their merits, preventing the abuse of market power and the concentration of wealth by a few big businesses.” More recently, the Commissions Recovery Plan (see Section 3.4 above), also underlines that ”EU competition policy is essential to ensuring a level playing field in today’s economy, driving innovation and giving consumers more choice”.

As explained above in Section 2.2, the three overarching SAM objectives (that is to say fostering good aid; “big on big, small on small” and faster access to aid) aimed at contributing to the achievement of the EU 2020 policy objectives, Europe's growth strategy. The single market is Europe's best asset for generating sustainable growth and competition policy (including State aid control) is a major driver of growth through its fundamental role in defending and strengthening the single market. Those principles remain valid under the six Commission priorities for 2019-24 and as such, the three SAM objectives continue to contribute to them.

It also suggests that the objectives of the individual State aid rules have been to a large extent appropriate for meeting the needs within the EU so far, but that they do not fully reflect recent EU policy developments and Commission priorities for the future, in particular the Green Deal, as well as the Digital and Industrial Strategies. The potential impact and the uncertainties brought by the COVID-19 crisis cannot be fully evaluated yet.

The analysis suggests that the overall SAM objectives are appropriate for meeting the needs within the EU.

How well do the overall SAM objectives and the objectives of the individual State aid rules under the Fitness Check still correspond to the needs within the EU?

The findings of the analysis on relevance are subject to the limitations stemming from the stakeholder consultation and constraints on the possibility of full triangulation.

In a second step, it examines how well adapted are the State aid rules under the Fitness Check to subsequent market developments and technological advances.

In a first step, it thus examines whether the overall SAM objectives and those of the individual State aid rules under the Fitness Check were appropriate and whether they are still appropriate in light of potentially changing needs, and therefore whether the action as set out in the intervention logic above continues to be justified.

This section evaluates whether the SAM objectives and those of the individual State aid rules under the Fitness Check still correspond to the needs within the EU.

·RDI would mainly need clearer definitions of some key concepts such as innovation clusters and clearer rules (scope for providing funds to innovation clusters).

·RAG for which the results of the targeted consultation and expert interview confirmed a high level of administrative burden related to the notification procedure for regional aid, potentially leading to some investors reducing their project scope or being discouraged to apply for aid;

·RFG is also considered burdensome because of procedural aspect (ex ante assessment, notification, such as paperwork) as well as the lack of clarity of certain rules of the Risk Finance Guidelines (identification of market definitions…);

·IPCEI, as the administrative burden comes from a lot of different parameters, namely, the notification including the gathering of documents (different from other instruments) and the interpretation of specific notions (such as “first industrial deployment”, “commercial activities”);

Finally, following the assessment in the SWD and the feedbacks in Annex 8, the instruments with the greatest potential for further burden reduction for both the Member State concerned and the beneficiary seem to be:

Furthermore, as mentioned by Executive Vice-President Vestager in January 2020, the present Commission has committed to support a rapid transition to a green, digital economy, involving to check urgently whether our State aid rules and guidelines are up to date (namely 6 set of rules including EEAG, RAG, RDI, IPCEI, RF and the relevant GBER parts). In that spirit, the EVP committed to decrease complexity, which should naturally help on the administrative burden “The transition ahead will be complex – and the state aid rules shouldn’t add to that complexity. On the contrary – we should make it as straightforward as we can, to support the investments that are so vital for our future”.

First, it seems that some stakeholders are not aware of the Guide on GBER, which provides 72 pages of explanations (some of them addressing some of the stakeholder’s issues).

By way of example, the present Fitness Check identified the following instruments with the greatest potential for further burden reduction for both the Member State concerned and the beneficiary: IPCEI, RFG, RAG, RDI.

The 2018 State aid Scoreboard confirms the benefits of SAM: quicker implementation of public support by Member States, to the benefit of citizens, businesses and regions; less bureaucracy, red tape and delays. It also highlights the role of State aid control in steering public aid towards objectives of common interest (e.g. RDI and investment in renewable energy), while ensuring benefits for society and minimising the negative impact of State aid on competition.

·At the same time, notified State aid measures tend to cover bigger budgets and spending than in the past, in line with the Commission's approach to be “big on big things and small on small things”. In 2017, the average annual budget of notified measures implemented was about ÈUR 230 million, an increase of about 18% and 126% compared to 2015 and 2013 respectively

·The growing share of spending falling under GBER implies that, on average, State aid measures can be implemented much more quickly than in the past by Member States.

·Total expenditure on measures falling under the General Block Exemption Regulation (GBER) in the EU represented about EUR 41.7 billion in 2017, a remarkable increase of about EUR 7.8 billion compared to 2016. For the first time, spending under GBER increased for all possible objectives. In particular, GBER spending strongly increased for local and multi recreational infrastructures (+129%), for aid to SMEs and risk finance (+81%), for social support to individual consumers (+ 56%), for research, development and innovation (+30%), for aid to culture and heritage conservation (+28%) and for employment (+21%).

·State aid control does not prevent Member State governments from focusing aid on their own legitimate policy objectives and priorities. In 20 Member States, environmental protection and energy savings represent one of the two main policy objectives for which they spent the most in 2017, followed by regional development in 9 Member States, research, development and innovation in 9 Member States and culture in 6 Member States

·In 2017, Member States spent EUR 116.2 billion, i.e. 0.76% of EU GDP, on State aid, compared to EUR 106.6 billion, i.e. 0.72% of EU GDP, in 2016. About 53% of total spending was attributed to State aid to environmental and energy savings, largely due to the approval and implementation of numerous renewable energy initiatives in many Member States.

More into details, the State aid Scoreboard shows the positive role of State aid in steering public aid towards common interest objectives, while minimising the negative impact of State aid on competition, and confirms the benefits of SAM:

·Better competitors in global markets: Competition within the EU helps make European companies stronger outside the EU too – and able to hold their own against global competitors.

·Innovation: To deliver this choice, and produce better products, businesses need to be innovative – in their product concepts, design, production techniques, services etc.

·More choice: In a competitive market, businesses will try to make their products different from the rest. This results in greater choice – so consumers can select the product that offers the right balance between price and quality.

·Better quality: Competition also encourages businesses to improve the quality of goods and services they sell – to attract more customers and expand market share. Quality can mean various things: products that last longer or work better, better after-sales or technical support or friendlier and better service.

·Low prices for all: the simplest way for a company to gain a high market share is to offer a better price. In a competitive market, prices are pushed down. Not only is this good for consumers - when more people can afford to buy products, it encourages businesses to produce and boosts the economy in general.

As regards benefits, an improved State aid system, like the SAM fitting into the Competition Policy in general, is about applying rules to make sure businesses and companies compete fairly with each other. This encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality.

It is expected that costs borne by the companies have decreased or at least not increased substantially. The cost are mainly borne by public authorities for notifying or designing a GBER scheme. But the lighter and mainly used GBER process and, ultimately the fact State aid measures could be processed more rapidly than before SAM should bring less cost and more benefits to the companies. It should be pointed out that the wide majority of public consultations coming from companies or associations of companies did not point specifically to an increase of costs due to the adoption of SAM.

In more detail, the Italian authorities have notably argued: “By strictly reducing the number of […] procedures subject to a decision, the Commission, in addition to the responsibility of the Member States in the decisions concerning the compatibility of the aid schemes with the derogations provided for, has ensured considerable cost savings resulting from the management of notification and timing procedures, since the Member States, since they no longer have the obligation to comply with the suspension clause, can proceed directly with the implementation of the scheme and can intervene more quickly and effectively” while the French authorities concluded their analysis by arguing: “The French authorities consider that the current rules have effectively decreased the burden of notifying to the Commission, which is a real benefit and should be safeguarded” while the same French authorities also point that when it comes to notification or ex-post control, an important amount of work and cost not only on the public authority side but also for the beneficiaries, sometimes leading to with withdrawing the State aid requests.

In addition, as already explained above, the results of the public consultation showed that 70% of the overall respondents who expressed an opinion considered that the State aid rules subject to the current Fitness Check have reduced at least partially the administrative burden for public authorities compared to the State aid rules in force before the State aid modernisation. When singling out the replies of the public authorities themselves, only 23% reply that their administrative burden has not been reduced with the new rules. Regarding the administrative burden for beneficiaries, 54% of the overall respondents who confirmed that the State aid rules subject to the current Fitness Check have reduced at least partially the administrative burden for those stakeholders. When filtering the replies of the public authorities only, the majority grows to 61% of the respondents considering a decrease, even partial, of the administrative burden. This is also reflected in some certain sectors like EEAG, where overall, the majority of respondents (53%) to the EEAG consultation thinks the amount of administrative costs are low with respect to the total amount of aid .

Moreover, the general compatibility of State aid is now based on the same principles – the so-called common assessment principles, as described in detail in Section 5.1.1. It makes the enforcement of the rules more uniform across all types of aid and allows Member States to gain more experience on how State aid is assessed by learning from practice across the spectrum of the various types of aid. In particular, the common assessment principles require market analysis and proof that State aid is an appropriate, necessary and proportional intervention that can address a policy problem without causing an undue distortion of competition. The task of carrying out a credible market analysis and designing a measure that can satisfy those principles is considerably more cumbersome. Member States are naturally less reluctant to notify a measure if it will be more costly in terms of administrative resources to have it approved and if a fairly similar measure could be adopted on the basis of the GBER at much less cost. The GBER has thus become more attractive and more used, while the alternative option of the guidelines is less used and potentially more costly. Therefore, overall, compared to the baseline scenario (see also Section 2.3.1), the implementation of the common principles has led to a clearer methodological framework for the various State aid rules contributing to the achievement of the objectives of fostering good aid and providing faster access to aid.

When focussing the notification per instrument/guidelines between 2008 and 2018, it is clear that notifications dropped in all the sectors and guidelines.

When looking at the difference in the total number of PN and N procedures/measures submitted by Member States in the periods before and after the SAM, we can observe how pronounced is the decrease (X refers to the number of GBER measures).

Block-exempted measures (GBER) do not require any case assessment, which reduces to zero the effort otherwise required in the context of a notification. The adoption of the SAM also resulted in a substantially lower amount of notified State aid measures being submitted to DG COMP. Based on the data available on the total number of notification and pre-notification procedures submitted by Member States in the periods before and after the SAM.

The available evidence in the present Fitness Check has indicated that the SAM rules have generally and in a wide majority of cases allowed to decrease administrative burden successfully compared to the baseline scenario, although there still seems to be room for improvement, in particular with regard to the clarification of certain definitions and concepts. The scope of the GBER has been expanded significantly. As mentioned before, close to 90% of all State aid measures implemented by Member States are now based on GBER provisions. This is a major success for the SAM, as increased use of the GBER relieves Member States from the administrative cost and time of notification. The Commission is also relieved from having to deal with routine or cases with a lower impact on competition. The State aid measures could be implemented more rapidly than before SAM, since the increasing share of GBER measures does not require any procedure with and decisions from the Commission before being put in place. The costs are full part of the administrative burden.

The lack of quantifiable cost and savings data has hampered analysis of the costs of the measures evaluated. Annual costs incurred by the national administrations are often difficult to estimate precisely. No stakeholder or known studies has been able to provide an estimation. Also the valuation of the benefits that can be attributed to the SAM is challenging. First, this is because it is difficult to attribute benefits to so many specific measures. In addition, many measures are multifunctional and have multiple benefits that contribute to the objectives of several policies. The discussion below is therefore based mostly on qualitative inputs and an assessment of the overall impression of administrative burden as reported previously by the stakeholders as well as benefits observed following the SAM.

The analysis suggests that benefits derive from SAM, compared to the baseline scenario not only for public authorities, but also for undertakings and indirectly for consumers. The costs associated with SAM seem rather low compared with the benefits observed.

To what extent are the costs associated with SAM proportionate to the benefits it has generated?

Finally, except the Railway Guidelines and to some extent the de Minimis Regulation and the Aviation Guidelines, all the other rules clearly achieved their established objectives and participated to the SAM objectives of “Fostering good aid”.

Those findings corroborate with the results of the public consultation, where a wide majority of respondents consider that State aid rules under the Fitness Check have ensured efficient State expenditure. Indeed, for all the specific rules, more than 83% of the respondents, who expressed an opinion, consider that the State aid rules under the Fitness Check have ensured efficient State expenditure to some extent or to a large extent. Those who replied “to some extent only” mostly made technical comments regarding the individual rules.

Those facts, together with the findings on the objective on good aid, indicate that SAM contributed to an efficient State expenditure. The underlying idea is that Member States are budgetary constrained, and “good aid” helps to steer them to spend the money better and to facilitate the EU priorities in that point of time. Hereto, it also has to be underlined that, under certain circumstances, the definition of State aid comprises funds coming from the EU budget. As much of the State aid expenditure is actually coming from the EU budget or is complemented by the budget, it is also the Commission’s objective to steer the spending where the EU priorities are.

As also explained in Section 2.2, SAM was designed to be a more focused framework allowing Member States to better contribute both to the implementation of the Europe 2020 strategy for sustainable growth as well as to budgetary consolidation following the years of the financial and economic crisis. In particular, stronger and better targeted State aid control can encourage the design of more effective growth-enhancing policies and it can ensure that competition distortions remain limited so that the internal market remains open and contestable. It can also contribute to improving the quality of public finances.

It results from the above that overall, Member States’ State aid spending capacity has increased in the last five years compared to the baseline scenario. All Member States that were spending below EU average five years ago, mostly EU13 or Member States seriously affected by the European sovereign debt crisis, are catching up. Some of the largest and wealthiest Member States, which were spending above EU average in 2013, have further increased their spending capacity. Only a few smaller Member States have decreased their spending capacity.

The chart is divided into four quadrants: (i) on the upper right-hand side, there are Member States who were spending already more than the EU average in 2013 and have kept increasing their expenditure in per capita terms; (ii) on the upper left-hand side are Member States who were spending less than the EU average in 2013, but have increased since then; (iii) the lower left-hand side of the chart would represent Member States that were spending less than the EU average in 2013 and have decreased spending since then. Finally (iv) Member States reported in the lower right-hand side of the chart are Member States which were above the EU average in 2013, but have decreased their spending per capita in the period 2013-2018.

Figure 29 shows the relation between State aid spending per capita, including co-financed aid, in 2013 (on the x-axis) and the change in State aid spending per capita registered in the period 2013-2018 (on the y-axis) . Each bubble in the chart corresponds to a different Member State. The size of the bubbles corresponds to the nominal amount of spending in 2018.

If wealthier Member States were allowed to support their domestic industries in an unrestrained manner, this would increase disparities and hinder the integration of the Single Market. Figure 29 looks at how State aid spending has evolved across the different Member States from 2013 (the year before the introduction of SAM) until 2018.

According to the State aid Scoreboard, the Member States are increasingly using GBER measures since SAM. Member States implemented 1666 new GBER measures in 2018, now representing 94.7% of new State aid measures. This upward trend gets more pronounced each year in the actual expenditure of the schemes: among the measures active in 2018, 86.0% are GBER measures, against 54.8% in 2014.

The analysis suggests that the SAM rules, in light of the achieved objective of "good aid", allowed for a more efficient State expenditure compared to the baseline scenario.

Finally and as explained before, the negative views from some businesses on decrease of administrative burden for beneficiaries were neither representative in terms of Member States nor in terms of issues or instruments or group of respondents. The issues raised often refer to details or particular situations and do not relate to the SAM architecture.

Further, it is important to underline that national authorities may impose additional requirements with respect to the EU framework, meaning that the burden may come from the national rules rather than the European rules.

According to the evidence collected in the case studies about the Risk Finance Guidelines, the burden is generally not perceived as excessive by the stakeholders. The perceived administrative burden to apply for and comply with finance measures may depend on the level of experience and specialization of the stakeholder, and more experienced SMEs might be able to rely on specialized human resources and be able to better deal with the requirements.

As regards beneficiaries, for them the main positive impact is the shortened time to get access to aid due to the omission of the Commission’s approval procedure. However, according to the survey of the RAG study, which is the most explanatory in terms of costs and administrative burden, a few aid-granting authorities reported that they or the beneficiary reduced the requested regional State aid budget for an investment project just below the notification thresholds in order to avoid the administrative burden related to notifying the measure to the Commission. In addition, experts considered the level and depth of confidential internal information that the beneficiaries have to provide to the aid granting authorities in case of notification as very high. Beside the lengthy and burdensome notification process, there is the risk of losing the whole State aid budget if the aid is prohibited. Without notifying State aid, investors can get the amount up to the notification threshold without any risk, which would be an important advantage.

Public authorities seems to have widely benefitted from the SAM in terms of reduction of administrative burden and reduction of costs compared to the baseline scenario. As said in the SWD, 77% of the public authorities who replied considered that SAM had reduced administrative burden at least partially for public authorities. It seems to be straightforward. For public authorities, while their internal procedures may be the same, the significant “cost” reduction materialises in terms of much le