2000/66/ECSC: Commission Decision of 28 October 1998 on aid which Italy plans to grant to the steel company Acciaierie di Bolzano SpA (notified under document number C(1998) 3439) (Text with EEA relevance) (Only the Italian text is authentic
Date: 1998-10-28
Institutions: European Commission
Subjects: Italy, State aid, aid to industry, environmental protection, investment aid, iron and steel industry

28. 1. 2000

EN

Official Journal of the European Communities

L 23/65

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 28 October 1998

on aid which Italy plans to grant to the steel company Acciaierie di Bolzano SpA

(notified under document number C(1998) 3439)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2000/66/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Aid for research and development

Having regard to the Treaty establishing the European Coal and
Steel Community,

Having regard to Commission Decision No 2496/96/ECSC
establishing Community rules
for State aid to the steel
industry (1), and in particular Article 6(5) thereof,

Having given interested parties notice
to submit
comments, and having regard to those comments (2),

their

Whereas:

I

By letter of 23 July 1998 the Commission informed the Italian
authorities of its decision to initiate the procedure under Article
6(5) of Commission Decision No 2496/96/ECSC (hereinafter
referred to as the ‘Steel Aid Code’) in respect of part of the
environmental aid and research and development aid which the
autonomous province of Bolzano planned to grant to the steel
undertaking Acciaierie di Bolzano SpA (hereinafter referred to
as ‘ACB’).

From the information available to the Commission, which was
based essentially on the letters sent by the Italian authorities,
the Commission draws the following conclusions.

Article 2 of the Steel Aid Code provides that aid granted to
defray expenditure by steel undertakings on research and devel-
opment projects may be deemed compatible with the common
market if it is in compliance with the rules laid down in the
Community framework for State aid for research and develop-
ment (3).

The framework's provisions which are relevant to this Decision
lay down that:

— aid may be authorised for industrial research provided that
it involves the acquisition of new knowledge, the objective
being the development of new products, processes or
services;

— pre-competitive research and development projects are
eligible provided they cannot be converted to or used for
industrial applications or easily exploited from a commer-
cial point of view.

It appeared to the Commission that, through the projects noti-
fied, ACB essentially intended to extend its range of products in
order to penetrate new and more profitable markets. The prod-
ucts already existed and were already in production. It also
appeared that a significant proportion of
the investments
would in fact be in the modernisation of the plant intended for
the new products. Thus, rather than consisting of the develop-
ment of new products in special steels, the project was aimed
at the modernisation of ACB's products and the plant required
to manufacture them.

(1) OJ L 338, 28.12.1996, p. 42.
(2) OJ C 269, 28.8.1998, p. 5.

(3) OJ C 45, 17.2.1996, p. 5.

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The Commission noted further that the costs concerning plant,
machinery and equipment which, it was claimed, were used for
R & D, did not appear to be eligible because they were decided
by the company independently, as part of the reconversion of
the Bolzano plant: thus the aid in question did not apparently
serve as an incentive for the investments.

impose any standards. The measures
Italian law does not
would also help to reduce noise levels to below 50 dBA,
compared with a legal threshold of 70 dBA. Sulphur dioxide,
with a statutory limit of 1 700 mg/m3, would be completely
eliminated as a result of the measures by means of a non-
polluting methane heating system. Lastly, the reduction and
filtering of fumes and dust, for which the statutory limit is
150 mg/Nm3, could be cut to under 25 mg/Nm3, and would
be totally eliminated from the workplace.

Aid for protection of the environment

The compatibility of the environmental aid must be assessed
under Article 3 of the Steel Aid Code, which provides that aid
for environmental protection may be deemed compatible with
the common market it is in compliance with the rules laid
down in the Community guidelines on State aid for environ-
mental protection (1),
in conformity with the application
criteria outlined in the Annex to that Code.

In assessing this particular case, the Commission noted that the
guidelines on environmental aid provide that aid that allows
significantly higher levels of environmental protection to be
attained than those required by mandatory standards may be
authorised up to a maximum of 30 % gross of the eligible
costs. Furthermore, the Annex to the Steel Aid Code provides
that any advantage in terms of lower production costs as a
result of the investment will in any case be deducted from the
environmental aid.

The Annex also states that the higher aid level resulting from a
significant
in environmental protection will
apply only to the part of the investment aimed at additional
environmental protection.

improvement

in renovation of

In view of the foregoing, it must be concluded that the invest-
ment is aimed solely at environmental protection, which means
that it is not necessary to deduct any production costs, except
for those relating to the investment
the
company's head office and investment in new ecological plant
for chemical pickling of steel coil and recovery of the liquid
waste (which cannot be released into the environment because
of the presence of toxic acids), which could be related to the
steelmaking process. It is also clear from information in the
Commission's possession that the proposed ecological invest-
ments would enable ACB to achieve a far higher level of
environmental protection than the statutory minimum.

The considerable extra expense involved in environmental
investment in addition to that required to bring the plant into
line with minimum standards would be justified, in this case,
given the location of the steelworks in the middle of the city of
Bolzano, which in the past has led people living near the works
to form associations to protest about environmental condi-
tions. For this reason ACB decided to invest on a far larger
scale than would have been necessary to meet environmental
standards, even opting to replace plant which, though by no
means obsolete, would not achieve the higher level of environ-
mental protection which the company desired.

This applies to the new ecological plant for chemical pickling
and the recover of used acids. The experts' report sent by the
Italian authorities indicated that the old plant, built in the
mid-1970s, could have been used for another ten years, i. e. at
least until 2008. This means that at present,
just as ACB
decides to replace it, the plant still has a significant residual
lifespan, of over 25 %. The same goes for the new waste-water
treatment system, which was installed in 1975 and could
continue to be used until 2006.

The Commission thus had grounds for concluding that ACB
planned to guarantee a significantly higher level of environ-
mental protection than that required by law. Furthermore, it
was clear from the notification that the increase in aid for the
abovementioned ecological investments was not calculated on
the basis of total investments (ITL 49,5 billion) but solely on
the additional investment aimed at achieving a higher standard
of protection (ITL 31,3 billion).

The independent experts' reports forwarded by the Italian
authorities indicated that, as a result of the notified measures,
concerning the adaptation of relatively recent plant, ACB
would reduce concentration of primary and secondary dusts in
the scrubbed fumes to 1 mg/Nm3, the statutory threshold in
Italy being 10 mg/Nm3 (Presidential Decree No 203/88 and
the Ministerial Decree of 12 July 1990). Nor would the fumes
contain any CO or benzofurans (PCDD + PCDF), although

(1) OJ C 72, 10.3.1994, p. 3.

As regards the replacement of the roofs on the buildings which
house the head office and the plant proper, for which the
investments were to total some ITL 6,5 billion, the Commis-
sion concluded from the experts' reports that the state of
dilapidation was such that the project was essential. It seemed
likely, therefore, that the work would have been carried out in
any case, since the state of the roof made it absolutely essential.
the Commission
In accordance with the Steel Aid Code,
concluded that, since the ecological
investments concerned
projects which could not in any case be delayed, they could not
be regarded as eligible for environmental aid.

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it seemed that the new ecological chemical pickling
Lastly,
plant, for which the investment was to total ITL 13 billion,
would have a significant effect on the production process;
accordingly, the Commission informed the Italian authorities of
its reservations concerning the acceptability of the investment,
which, in order to qualify for aid, should have been confined
solely to environmental protection. In reply, the Italian authori-
ties submitted new figures on the eligible investments and the
relevant aid and outlined the economic benefits derived by
ACB, in particular those connected with the recycling of some
of the pickled acids. This benefit, calculated at some ITL 100
million per year (total of ITL 1 billion over ten years) was
therefore deducted, and the original figure for eligible invest-
ment was reduced from ITL 13 billion to 12 billion.

Therefore, with the exception of the investments for the re-
roofing of the ‘Sede’ and ‘Erre’ buildings, housing respectively
the company's head office and the plant proper, the Commis-
sion's assessment of all the other plans to grant environmental
aid was favourable.

In view of the foregoing, it was difficult for the Commission to
determine whether the aid for research and development and
the aid for re-roofing the buildings housing the company's
head office and plant proper were compatible with the
It was therefore necessary to initiate the
common market.
procedure under Article 6(5) of Decision No 2496/96/ECSC in
respect of the aid.

The Commission did not raise any objections to the planned
aid for the other notified investments aimed at environmental
protection. For this aid, therefore,
in respect of which the
Commission did not have any reservations, publication in the
Official Journal of the European Communities of the decision to
initiate the procedure simply constituted a formal invitation to
the Member States to submit their comments to the Commis-
sion in accordance with the Annex to the Steel Aid Code.

II

The Commission called on the Italian Government to submit
its comments; the other Member States and interested third
the
parties were informed by way of
Decision to initiate the procedure.

the publication of

By fax of 28 September 1998 the company Wirschaftsvereini-
gung Stahl sent the Commission its comments, which were
later forwarded to the Italian authorities. It agreed with the
Commission's decision to initiate the procedure with respect to
research and development aid and to part of the environmental
aid concerning re-roofing.

On 12 October 1998 the Commission had received no other
comments from Member States or interested third parties.

III

In response to the initiation of
the procedure and the
comments submitted by the interested third party, the Italian
Government took some account of the Commission's position
and announced its decision to cancel some of the disputed aid,
thereby reducing environmental aid from ITL 12 447 million
to ITL 11 672 million and research and development aid from
ITL 1 600 million to ITL 1 234 million. The Italian Govern-
ment also asked for authorisation to grant the aid not disputed
in the decision to initiate the procedure.

IV

ACB is a company which manufactures products listed in
Annex I
is covered by the rules
governing State aid laid down in that Treaty.

to the ECSC Treaty;

it

Article 4(c) of the ECSC Treaty provides that subsidies or aids
granted by States, or special charges imposed by States, in any
form whatsoever, are recognised as incompatible with the
common market for coal and steel and should accordingly be
abolished and prohibited with the Community. The Steel Aid
Code specifically and exhaustively lists exceptions to the
general ban on aid. Under certain conditions, it allows author-
isation for aid for research and development (Article 2), for
environmental protection (Article 3)
closures
(Article 4).

and

for

As was stated in Section I, aid granted for investment in R & D
may be deemed compatible with the common market if it is in
compliance with the rules laid down in the Community frame-
work for State aid for research and development.

Following the reservations expressed by the Commission when
it initiated the procedure, in particular those concerning the
fact that part of the R & D aid was intended for new plant and
machinery as part of the partial reconversion of the Bolzano
plant, Italy reduced the eligible investment by ITL 1,8 billion,
namely from ITL 7,8 billion to ITL 6 billion, thus planning a
new aid figure of ITL 1,234 billion.

irrevocable decision to
While noting the Italian authorities'
reduce the level of R & D aid by the amount indicated, the
Commission considers that ITL 2,823 billion of the remaining
investment regarded by Italy as eligible for aid is still intended
to support ACB's commercial ambition to extend its range of
to penetrate new and more profitable
products in order
markets. The products already exist and are being produced by
ACB's competitors; thus, rather than consisting in the develop-
ment of new products in special steels, the project is aimed at
the modernisation of ACB's products and the plant required to
manufacture them.

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However the documentation shows that, of the remaining R &
D investment, ITL 3,177 billion will be used for the ‘triplex’
process, which allows methane to be injected at high pressure
in order to cut argon consumption. This innovatory process
has not so far been used industrially by any other European
firm in the industry. If it is viable, it should eventually produce
savings in energy and decarburisation costs of some 20 %
compared with conventional technologies.

Furthermore, the Commission has no doubt that the aid in
question will stimulate that part of the research and develop-
ment programme concerned with the new production process.
The aid appears to have been decisive in the company's
decision to undertake new engineering research, in addition to
its day-to-day research work, to develop the triplex process. To
that end, the Commission has analysed the difference between
the company's past and present research expenditure, set to rise
from 0,5 % to 1,5 % according to forecasts for 1998. At the
same time,

its full time staff would rise from 9 to 16.

Lastly, the amount earmarked for R & D in 1998 in connection
with the notified project is appreciably higher than the average
for the sector, which ranges from 0,9 % to 1 %.

Thus the variation in the amount allocated to research (which
doubles from 0,5 % to 1 % of turnover), the number of persons
assigned to the research programme (which almost doubles
from 9 to 16) and the investments in research and develop-
ment expressed as a percentage of turnover (1,5 % of turnover
against an industry average of around 1 %) appear to indicate
that,
in this case, the condition that aid must serve as an
incentive has been satisfied.

A large proportion of the investments in question, to the tune
of ITL 2,823 billion, do not appear to be covered by the
Community framework for State aid for research and develop-
ment as they are not aimed at the acquisition of new knowl-
edge for use in developing new products and/or production
processes, and, moreover, can be converted or used for indus-
trial applications or easily exploited from a commercial point
of view; however,
the investments in the triplex process,
amounting to a total of ITL 3,177 billion, may be regarded as
compatible with the common market.

compatibility of the aid concerning investments for the re-
roofing of the ‘Sede’ and ‘Erre’ buildings. Although re-roofing
will remove the dangers linked with asbestos, nevertheless this
type of work, in this case replacement of the roofing material,
was necessary in any case, in view of the totally dilapidated
state of the roofs. There is every indication, therefore, that the
work would have had to be carried out in any case, even if
there had been no asbestos involved, since the state of disrepair
of the roofs made it absolutely essential and urgent, as is
established by the experts' reports sent to the Commission.

In accordance with the Steel Aid Code, and in particular the
Annex thereto,
the Commission concludes that ecological
investments in projects which cannot in any event be delayed
are not eligible for environmental aid.

This means that
the notified aid concerning investments
amounting to ITL 6,5 billion intended for the re-roofing of the
‘Sede’ and ‘Erre’ buildings cannot be authorised.

The State aid planned for the roofing of the two buildings
cannot therefore be authorised. The overall aid for the invest-
ments in environmental protection which amount to ITL 43
billion (ITL 49,5 billion notified, less the 6,5 billion for the
roofing), cannot therefore exceed the total sum of ITL 11,145
billion, i.e. ITL 9,390 billion, which is 30 % of ITL 31,3 billion
of investments, plus ITL 1,755 billion of aid, equivalent to
15 % of the remaining ITL 11,7 billion of investments.

Lastly, the Commission notes that it is not possible to authorise
an increase in the aid intensity such as would be allowed for
environmental protection investments carried out by an SME,
because ACB, which is part of the Valbruna di Vicenza steel
group, employs well over 250 people.

HAS ADOPTED THIS DECISION:

Article 1

Italy has notified the Commission of its intention to grant aid
of around 25 % of the investments in question. The aid which
may be authorised for research and development concerning
the triplex process is therefore ITL 794 million.

to Acciaierie di
The State aid which Italy plans to grant
Bolzano SpA to finance investment in environmental protec-
tion, up to a maximum gross amount of ITL 11,145 billion, is
compatible with the common market for coal and steel.

V

Article 2

With regard to environmental aid, the Commission notes that
the information provided by the Italian authorities is not suffi-
cient to alter the substance of its original assessment of the

The State aid which Italy plans to grant
to Acciaierie di
Bolzano SpA to finance investment in research and develop-
ment, up to a gross maximum amount of ITL 794 million, is
compatible with the common market for coal and steel.

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Within two months of the date of notification of this Decision, Italy shall inform the Commission of the
amount of aid granted to Acciaerie di Bolzano SpA, to enable the Commission to verify that the amounts
laid down in Articles 1 and 2 have not been exceeded.

Article 3

This Decision is addressed to the Italian Republic.

Article 4

Done at Brussels, 28 October 1998.

For the Commission

Karel VAN MIERT

Member of the Commission