Report - State Aid Scoreboard - Autumn 2005 update
Date: 2005-12-09
Institutions: European Commission
Subjects: State aid, activity report, control of State aid

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 9.12.2005 
COM(2005)624 final 

REPORT 

State Aid Scoreboard 

- autumn 2005 update - 

(presented by the Commission) 

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TABLE OF CONTENTS 

Executive Summary ................................................................................................................... 4 

Introduction ................................................................................................................................ 8 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

1.6. 

1.7. 

1.8. 

Part One: Progress towards the Lisbon agenda............................................................ 9 

State aid in absolute and relative terms........................................................................ 9 

Sectoral distribution of aid ......................................................................................... 12 

State aid to the transport sector .................................................................................. 14 

State aid to the agriculture and fisheries sectors ........................................................ 16 

State aid to the coal and steel sectors ......................................................................... 17 

State aid to the shipbuilding sector ............................................................................ 19 

State aid for horizontal objectives.............................................................................. 19 

Trend in State aid for horizontal objectives ............................................................... 21 

1.8.1.  State aid for research and development (R&D) ......................................................... 22 

1.9. 

State aid supporting regional development and cohesion .......................................... 23 

1.10.  Aid awarded under the block exemption regulations................................................. 25 

1.11. 

State aid instruments .................................................................................................. 25 

2. 

Part Two: Special Focus on State aid for the environment and energy saving.......... 27 

2.1.1.  Policy context and rationale for environmental and energy policy............................ 27 

2.1.2.  Environmental measures – when do they constitute State aid? ................................. 29 

2.1.3.  Market failure and justification for environmental State aid ..................................... 31 

2.1.4.  Environmental State aid measures ............................................................................. 34 

2.1.5.  State aid expenditure on the environment.................................................................. 37 

2.1.6.  Revision of environmental guidelines........................................................................ 39 

3. 

4. 

Part Three: Exploring alternatives to state aid ........................................................... 40 

Part Four: Legislative and Policy developments........................................................ 44 

4.1. 

A modernized State aid policy ................................................................................... 44 

4.1.1.  Review of the regional aid guidelines........................................................................ 45 

4.1.2.  Communication on State aid to export-credit insurance ............................................ 46 

4.1.3.  Review of the R&D Framework ................................................................................ 46 

4.1.4.  Communication on State aid to innovation................................................................ 46 

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4.1.5.  Revision of the Communication on State aid to risk capital...................................... 47 

4.1.6.  Services of General Economic Interest (SGEI) ......................................................... 47 

4.1.7.  Revision of Environmental aid Guidelines ................................................................ 48 

4.2. 

4.3. 

4.4. 

4.5. 

5. 

6. 

Recovery of unlawful aid ........................................................................................... 48 

State aid to the agricultural sector.............................................................................. 51 

State aid to the transport sector .................................................................................. 52 

Enlargement ............................................................................................................... 53 

Online State aid scoreboard, register and other reports on state aid .......................... 54 

Methodological notes ................................................................................................. 55 

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EXECUTIVE SUMMARY 

Downward  trend  in  the  overall  volume  of  State  aid  has  leveled  off  …though  the  vast 
majority of Member States have heeded the call to favour horizontal objectives 

How  are  Member  States  responding  to  the  call  for  “less  and  better  targeted  aid”?  Although 
there are clear differences between the EU-25 Member States, broadly-speaking the answer is 
“no” to less aid but “yes” to better targeted aid. After the considerable fall in the level of aid 
at the end of the nineties, the underlying trend over the last five years has been stable rather 
than  downward.  The  vast  majority  of  Member  States  do  however  appear  to  be  shifting  the 
emphasis  from  supporting  individual  companies  or  sectors  towards  tackling  horizontal 
objectives. 

While the overall level of aid has remained stable in most Member States, the picture is 
not homogeneous throughout the Union 

While, for the Union as a whole, the volume of State aid has remained stable, the situation in 
some Member States has changed significantly. For example, the overall level of aid relative 
to GDP has fallen sharply in Cyprus, Czech Republic and Malta due largely to the phasing out 
of  pre-accession  measures.  Ireland,  too,  experienced  a  significant  decrease,  primarily  the 
result of a cut in the Irish Corporation Tax coupled with an increase in GDP. In contrast, aid 
in  relation  to  GDP  increased  significantly  in  a  number  of  Member  States:  in  France,  due 
largely to the restructuring of Alstom in 2004 while in Sweden and the United Kingdom the 
rise can be explained largely by increases in aid for horizontal objectives, particularly aid to 
the environment. 

Reducing aid by making better use of alternative instruments  

In  the  context  of  reducing  the  overall  volume  of  State  aid,  the  Commission  has  been 
examining with Member States to what extent alternative instruments can be used in place of 
(potentially) distortive State aid measures. One of the best ways to reduce the level of State 
aid  is  clearly  to  make  better  use  of  alternative  measures  such  as  general  and  regulatory 
measures.  Before  resorting  to  State  aid,  which  should  in  general  only  be  the  “second  best” 
option,  Member  States  should  verify  whether  it  represents  the  most  appropriate  solution, 
whether  it  is  targeted  carefully  to  problem  areas  and  is  limited  to  necessary  amounts  and 
effective means. Some types of instrument not only help to avoid distortions to competition, 
but also support Member States efforts to restore and maintain healthy public finances, which 
is also one of the main pillars of the Lisbon Strategy for Growth and Jobs. 

How can Member States ensure that their state aid policies are pursuing these objectives? The 
answer  lies  to  a  large  extent  in  the  granting  procedures  and  practices  of  State  aid  in  the 
Member  States.  As  a  first  step  towards  identifying  best  practices  that  support  a  “less  and 
better  targeted”  state  aid  policy,  the  Commission  addressed  a  written  questionnaire  to 
Member States in May 2005 and discussed these topics at a meeting with State aid experts in 
July. Part Three of the Scoreboard presents a summary of the replies. 

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The  share  of  horizontal  aid  has  increased  largely  due  to  a  sharp  increase  in  aid  for 
environmental and energy saving objectives coupled with a reduction in sectoral aid for 
some Member States, particularly to the coal sector 

In  line  with  the  commitments  undertaken  at  successive  European  Councils,  Member  States 
have continued to redirect aid towards horizontal objectives. Over the period 2000-2002 and 
2002-2004, the share of total aid for horizontal objectives increased by 4 percentage points, 
largely as the result of significant increases in aid for the environment and energy saving (+6 
points) as well as a reduction in sectoral aid for some Member States.  

EU-wide,  there  were  no  other  significant  increases  in  the  share  of  aid  for  other  horizontal 
objectives such as research and development. As stated in the recent draft Communication on 
State Aid for Innovation, the Commission makes clear that state aid is not the response to all 
Europe’s competitiveness or innovation problems. While the Commission recognises that, in 
an  effort  to  create  growth  and  jobs,  state  aid  policy  can  be  used  pro-actively  to  support 
innovation,  by  tackling  the  market  failures  that  prevent  markets  from  naturally  delivering 
innovation, it also stresses that for business to embark on a more innovative path it requires, 
first and foremost, effective competition. 

By 2004, the share of horizontal aid had risen to 76% of the total amount of aid (excluding 
agriculture,  fisheries  and  transport).  The  four  main  horizontal  objectives  were  environment 
and  energy  saving  (25%  of  total  aid),  regional  economic  development  (18%),  R&D  (12%) 
and  SMEs  (12%).  The  remaining  24%  was  aid  directed  at  specific  sectors  (mainly  coal) 
including aid to rescue and restructure ailing firms.  

While the vast majority of Member States have redirected aid to horizontal objectives, 
the share in total aid varies considerably between the Member States 

In  around  half  the  Member  States,  more  than  90%  of  all  the  aid  awarded  in  2004  was 
earmarked  for  horizontal  objectives.  In  another  group  of  Member  States  (Spain,  France  and 
Ireland)  the  share  was  around  60%  while  in  several  other  countries,  the  share  was 
significantly  lower:  50%  or  less in Hungary, Cyprus, Slovakia, Poland, Portugal  and Malta. 
The low share of horizontal aid (and thus relatively high share of sectoral aid) in Portugal was 
due a large regional aid tax scheme in Madeira. In Ireland, although aid awarded through the 
Irish Corporation Tax has decreased significantly it still accounts for a relatively high share of 
total  aid.  France,  Germany  and  Spain  have  relatively  high  shares  of  aid  to  the  coal  sector 
although the low share of horizontal aid in France is due mostly to the large award of aid to 
Alstom while in Germany, the large guarantee provided as a part of the restructuring package 
to Bankgesellschaft Berlin AG1 in 2002 is another important factor. For a number of the new 
Member  States,  the  disparity  can  be  explained  in  part  by  the  relatively  strong  support  of 
several  industries  (e.g.,  financial  sector,  coal  and  steel)  before  accession  in  the  context  of 
privatisation or to ensure viability. 

Overall level of aid earmarked for the least developed regions has increased significantly 
with enlargement 

Each Member State targets part of  its State aid towards the least developed regions, the so-
called  ‘assisted  regions’.  For  the  Union  as  a  whole,  an  estimated  €12.3  billion  of  aid  was 

1 

C28/2002 

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earmarked exclusively for assisted ‘a’ regions in 20042. This represents 27% of total aid (less 
agriculture, fisheries and transport for which a regional breakdown is not available). 

With  the  exception  of  Cyprus,  and  the  cities  of  Prague  and  Bratislava  which  qualify  for 
assistance under Article 87(3)(c) of the Treaty, the entire territories of the ten new Member 
States are eligible at ‘a’ level. 

Significant increase in aid for environmental and energy saving objectives 

Expenditure  on  environmental  and  energy  aid  increased  from  an  annual  average  of  €  6.5 
billion in the period 2000-2002 to € 9.3 billion during 2002-2004. While such aid is clearly 
directed  at  a  commonly  accepted  horizontal  objective,  only  a  relatively  small  proportion 
comprises  aid  to  make  investments  that  reach  higher  environmental  standards  than 
community  standards  or  to  undertake  further  investment  to  reduce  pollution  or  for  the 
development  of  renewable  energy  sources.  On  the  other  hand,  a  large  proportion  of  aid 
(accounting for around 80% of total environmental and energy saving aid in 2004) comprises 
tax exemptions of which the largest part had to be accepted in order to allow for certain types 
of  environmental  taxes  to  be  introduced,  e.g.,  to  limit  the  impact  of  such  taxes  on  the 
competitiveness  of  specific  companies  or  sectors.  Although  the  tax  exemptions  from 
environmental taxes do not aim at reaching higher environmental standards, such exemptions 
are only allowed where the taxes themselves are intended to make a significant contribution to 
protecting the environment and the exemptions should not undermine the general objectives 
pursued. Such exemptions have been used in particular by Germany, Sweden and the United 
Kingdom.  Part  Two  of  the  Scoreboard  provides  an  in-depth  look  at  the  environment  by 
describing the State aid rules applicable in this area.  

More than €3 billion awarded under the block exemption regulations 

By the end of 2004, more than 800 measures had been submitted by Member States under the 
block  exemption  regulations  covering  aid  to  SMEs3,  training,  employment.  Five  Member 
States, Italy (26% of the total), the United Kingdom (22%), Germany (11%), Spain (8%) and 
Belgium (7%) accounted for 75% of all exempted measures in 2004. As regards expenditure, 
an estimated €3.4 billion was awarded in 2004 under the three block exemption regulations. 
This represents around 10% of all aid directed at horizontal objectives. 

Around €3.4 billion of unlawful aid remains to be recovered 

Of  the  €  9.4  billion  of  aid  to  be  recovered  under  decisions  adopted  since  2000,  some  €  7.9 
billion  (a  principal  amount  of  €  5.9  billion  plus  almost  €  2  billion  interest)  had  been 
effectively recovered by the end of June 2005. Excluding interest, this represents 63.5% of the 
total amount to be recovered. 

2 

3 

The  Article  87(3)(a)  regions  are  largely  identical  to  the  Objective  1  regions  under  the  EU  Structural 
Funds.  This  figure  includes  all  aid  specifically  earmarked  for  assisted  ‘a’  regions  regardless  of  the 
overall objective of the aid. 
Excluding measures exempted under the block exemption regulation for agriculture (No 1/2004 of 23 
December  2003  on  State  aid  to  SMEs  in  the  agricultural  sector,  OJ  L  1,  03.01.2004,  pages  1-16)  for 
which there were 72 cases in 2004. 

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Main State aid figures for 2004 

The overall level of State aid4 granted by the twenty-five Member States was estimated at €62 
billion in 2004, the equivalent of 0.6% of GDP. In sectoral terms, around €40 billion of aid 
was  earmarked  for  the  manufacturing  and  service  sectors,  €15  billion  for  agriculture  and 
fisheries, €5.5 billion for coal and a little over €1 billion for the transport (excluding railways) 
sector.  

4 

Total  State  aid  in  the  sense  of  Article  (87)1  of  the  Treaty,  covering  manufacturing,  services,  coal, 
agriculture,  fisheries  and  transport  with  the  exception of  the  railway  sector.  For  the  ten  new  Member 
States, comparable data for the transport sector are not yet available. 

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INTRODUCTION 

The main aim of this update of the Scoreboard is to assess Member States progress towards 
meeting  the  Lisbon  objectives  and  response  to  successive  European  Councils  call  for  “less 
and better targeted State aid”. The European Council of March 2005 invited Member States to 
“continue  working  towards  a  reduction  in  the  general  level  of  State  aid,  while  making 
allowance for any market failures. This movement must be accompanied by a redeployment 
of aid in favour of support for certain horizontal objectives such as research and innovation 
and  the  optimisation  of  human  capital.  The  reform of regional aid should  also foster  a high 
level  of  investment  and  ensure  a  reduction  in  disparities  in  accordance  with  the  Lisbon 
objectives.” These goals were underlined by the Commission Recommendation on the Broad 
Economic Policy Guidelines for 2005-20085. 

The Scoreboard is divided into four main parts. Part One looks at the extent to which Member 
States  have  responded  to  the  Lisbon  Strategy  by  first  providing  an  overview  of  the  amount 
and type of (potentially) distortive State aid awarded by the Member States in 2004 and then 
examining  the  underlying  trends.  Part  Two  provides  a  special  focus  on  State  aid  for  the 
environment and energy saving, an area which has seen a sharp increase in aid levels in recent 
years.  

Part  Three  looks  to  what  extent  Member  States  assess  whether  or  not  State  aid  is  the  most 
appropriate form of intervention and what alternatives to State aid are used. It also includes an 
update of the recovery of unlawful State aid. Finally, Part Four summarises ongoing work to 
modernise State aid control through legislative and policy means.  

Improvements  have  been  made  to  the  coverage,  quality  and  timeliness  of  the  State  aid  data 
published in this Scoreboard. This is the first time that information has been presented for all 
EU-25 Member States even though the data for the ten new Member States prior to accession 
are not entirely comparable with those of the EU-15 Member States6. A revised Standardised 
Reporting Format7 has improved the comparability of information provided by Member States 
and  for  the  first  time  the  Commission  has  been  able  to  publish  data  for  the  previous  year,  i.e. 
2004 data in this update of the Scoreboard. 

In addition to this paper edition, a permanent online Scoreboard consisting of a series of key 
indicators and a range of statistical information for the EU Member States is available on the on 
the 
site 
(http://europa.eu.int/comm/competition/state_aid/scoreboard/).  

the  Competition  Directorate  General’s 

homepage 

Internet 

of 

The  spring  2006  Scoreboard  will  include  a  focus  on  enlargement,  looking  in  particular  at  the 
state aid situation in Bulgaria and Romania. 

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6 
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COM(2005) 141 final, 12.4.2005 
http://europa.eu.int/comm/economy_finance/publications/european_economy/2005/comm2005_141en.
pdf 
See autumn 2004 Scoreboard for further explanation on methodological issues. 
The  new  provisions  can  be  found  in  Commission  Regulation  (EC)  No  794/2004  of  21  April  2004. 
Annex  IIIA  covers  all  sectors  except  agriculture  (Annex  IIIB)  and  fisheries  (Annex  IIIC) 
http://europa.eu.int/eur-lex/en/archive/2004/l_14020040430en.html 

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1. 

PART ONE: PROGRESS TOWARDS THE LISBON AGENDA 

This  chapter  provides  an  overview  of  (potentially)  distortive  State  aid  granted  in  the  EU 
Member States in 2004 and examines the underlying trends. The main purpose is to measure 
the extent to which Member States have met the call for less and better targeted aid. Although 
there are clear differences between the EU-25 Member States, broadly-speaking the answer is 
“no” to less aid but “yes” to better targeted aid. After the considerable fall in the level of aid 
at the end of the nineties, the underlying trend over the last five years has been stable rather 
than  downward.  The  vast  majority  of  Member  States  do  however  appear  to  be  shifting  the 
emphasis  from  supporting  individual  companies  or  sectors  towards  tackling  horizontal 
objectives. 

1.1. 

State aid in absolute and relative terms 

Total State aid8 granted by the EU-25 Member States was estimated at €62 billion in 2004. In 
absolute terms,  Germany  granted the most aid  (€17 billion) followed by France (€9  billion) 
and Italy (€7 billion).  

In sectoral terms, around €40 billion of aid was earmarked for the manufacturing and service 
sectors,  €15  billion  for  agriculture  and  fisheries,  €5.5  billion  for  coal  and  a  little  over  €1 
billion for the transport (excluding railways) sector. 

8 

The  total  covers  aid  to  manufacturing,  services,  coal,  agriculture,  fisheries  and  part  of  the  transport 
sector but excludes aid to the railway sector (see section 1.3). 

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Table 1: State aid awarded in the EU-25 Member States, 2004 

Total state 
aid less 
agriculture, 
fisheries and 
transport in 
billion €

Total aid less 
agriculture, 
fisheries and 
transport as 
% of GDP

Total aid less 
railways as % 
of GDP

Total state 
aid less 
railways in 
billion €

EU-25
EU-15
10 new MS
 BE
 CZ
 DK
 DE
 EE
 GR
 ES
 FR
 IE
 IT
 CY
 LV
 LT
 LU
 HU
 MT
 NL
 AT
 PL
 PT
 SI
 SK
 FI
 SE
 UK

61,6
56,4
5,2
1,0
0,4
1,4
17,2
0,0
0,5
4,0
8,9
1,0
7,0
0,2
0,0
0,1
0,1
1,0
0,1
1,8
1,4
2,9
1,5
0,2
0,2
2,5
2,7
5,4

45,5
42,0
3,4
0,7
0,2
1,0
15,1
0,0
0,3
3,1
6,3
0,4
5,4
0,1
0,0
0,0
0,0
0,7
0,1
0,9
0,5
2,0
1,1
0,1
0,2
0,6
2,2
4,2

0,60
0,57
1,09
0,34
0,41
0,71
0,78
0,39
0,29
0,47
0,54
0,65
0,52
1,48
0,39
0,68
0,31
1,26
3,10
0,39
0,61
1,47
1,09
0,96
0,64
1,66
0,99
0,32

0,44
0,43
0,70
0,24
0,19
0,52
0,69
0,09
0,20
0,37
0,39
0,27
0,40
1,06
0,16
0,13
0,17
0,87
2,71
0,18
0,22
1,01
0,83
0,53
0,63
0,38
0,80
0,25  

(Potentially) distortive State aid as defined under Article 87(1) EC Treaty that has been granted by the twenty-
five  EU  Member  States  for  all  sectors  except  railways  and  has  been  examined  by  the  Commission. 
Comprehensive  data  on  transport  are  not  yet  available  for  the  ten  new  Member  States.  All  data  are  quoted  at 
constant prices. Source: DG Competition 

Disparities between Member States in the share of State aid as a percentage of GDP 

In relative terms, State aid amounted to 0.6% of EU Gross Domestic Product (GDP) in 2004. 
This  average  masks  significant  disparities  between  Member  States:  the  share  of  total  aid  to 
GDP  ranges  from  0.4%  or  less  in  Belgium,  Czech  Republic,  Estonia,  Greece,  Latvia, 
Luxembourg,  the  Netherlands  and  the  United  Kingdom  to  1.5%  or  more  in  Cyprus,  Malta, 
Poland and Finland (Table 1). The high proportion in some of the new Member States is due 
largely  to  pre-accession  measures  that  are  either  being  phased  out  under  transitional 
arrangements or limited in time though in Poland there has also been considerable financial 
support provided to the coal sector. In Finland, the explanation can be found in the relatively 
large amount of aid to agriculture which represents more than 70% of total aid in this country. 

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Indeed,  due  to  the  particularities  associated  with  aid  to  agriculture  and  fisheries,  it  is  worth 
looking  at  total  aid  less  these  sectors.  This  second  indicator  produces  a  rather  different 
ranking of Member States. For example, such aid in Finland represents 0.38% of GDP, just 
below the EU-wide average of 0.44%.  

It  is  important  to  bear  in  mind  that  some  aid  measures  can  not  be  quantified.  Although  the 
number of measures is limited, the distortion of competition is often very significant and has 
an  impact  on  the  overall  level  of  State  aid,  e.g.,  the  unlimited  State  guarantees  previously 
available to Electricité de France (EDF) and the German Landesbanken. Moreover, of the 96 
recovery  decisions  adopted  since  2000,  there  are  24  cases  for  which  the  aid  can  not  yet  be 
quantified. See recovery of unlawful aid (section 4.2).  

Downward trend in the overall volume of State aid seems to have levelled off 

Since  the  rapid  decline  towards  the  end  of  the  1990s  (see  spring  2005  Scoreboard),  the 
downward trend in the overall volume of aid appears to have leveled off since the year 2000, 
in spite of pledges by Member States at successive European Councils to reduce the overall 
level  of  aid.  The  degree  to  which  Member  States  have  achieved  this  goal  or  not  can  be 
measured by looking at total state aid relative to GDP over a period of one year, i.e. the trend 
from  2003  to  2004  or  by  observing  the  underlying  trend  over  the  periods  2000-2002  and 
2002-2004.  In  order  to  eliminate  as  far  as  possible  annual  fluctuations,  the  latter  option  is 
preferred. For the Union as a whole, total aid less agriculture, fisheries and transport relative 
to  GDP  remained  unchanged  between  the  two  periods  under  review.  This  average  masks 
however differences between Member States. The sharpest falls can be observed in Cyprus, 
Czech Republic and Malta due largely to the phasing out of pre-accession measures. Ireland, 
too, experienced a significant decrease, primarily the result of a cut in the Irish Corporation 
Tax9 coupled with an increase in GDP.  

In contrast, aid in relation to GDP increased significantly in a number of Member States: in 
France,  due  largely  to  the  restructuring  of  Alstom10  in  2004;  in  Poland,  the  rise  can  be 
attributed to the exceptional award of aid to the coal sector in 2003; while in Sweden and the 
United  Kingdom  the  rise  can  be  explained  largely  by  increases  in  aid  for  horizontal 
objectives, particularly aid to the environment. 

9 

10 

The  rate  of  corporation  tax  in  Ireland  has  been  cut  progressively  in  recent  years  and  is  12.5%  from 
2003. This has reduced the comparative value of the preferential 10% rate to the manufacturing sector, 
therefore contributing to the decline, in monetary terms, of aid to this sector. 
C58/2003 

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Table 2: Trend in the level of State aid in the EU Member States, 1994-2004 

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Annual 
average 
2000-02

Annual 
average 
2002-04

EU-25

Total state aid less 
agriculture, fisheries and 
transport in billion €

as % of GDP

EU-15

Total state aid less 
railways in billion €
as % of GDP

Total state aid less 
agriculture, fisheries and 
transport in billion €

as % of GDP

77,5
1,08

77,0
0,98

75,5
0,95

95,5
1,14

64,3
0,74

54,8
0,61

46,0
0,46

56,6
0,60

47,0
0,47

58,0
0,61

52,7
0,52

63,5
0,66

48,8
0,49

55,3
0,58

45,5
0,44

56,4
0,57

48,5
0,48

59,4
0,62

58,9
0,82

57,0
0,73

56,7
0,71

76,2
0,91

48,8
0,56

38,5
0,43

40,9
0,43

42,5
0,45

46,8
0,48

39,4
0,41

42,0
0,43

43,4
0,45

49,0
0,48

58,4
0,60

42,9
0,44  

Note:  The  exceptionally  high  figure  in  1997  can  be  largely  attributed  to  the  Credit  Lyonnais  case  in  France. 
Similarly the relatively high figure in 2002 is due in part to the substantial guarantee awarded as a part of the 
restructuring  package  to  Bankgesellschaft  Berlin  AG  (C28/2002).  For  the  ten  new  Member  States,  no  data  on 
transport are available while data on agriculture are available for 2004 only. Source: DG Competition. 

In making comparisons between Member States, it is important to bear in mind the effect that 
the trend in GDP has on this indicator. Member States which have experienced relatively high 
economic  growth  over  the  period  under  review  could  theoretically  increase  the  level  of  aid 
and still demonstrate a downward trend. 

1.2. 

Sectoral distribution of aid 

Sectoral distribution of aid varies considerably among Member States and over time 

Although  the  data  do  not  provide  an  accurate  picture  of  the  final  recipients  of  the  aid,  they 
nevertheless give some indication as to which sectors are favoured by each Member State. In 
2004,  around  65%  of  State  aid  in  the  EU-25  Member  States  was  earmarked  for  the 
manufacturing11  and  service  sectors.  A  further  24%  was  directed  towards  agriculture  and 
fisheries,  9%  for  coal  and  the  remaining  2%  going  to  the  transport  (excluding  railways) 
sector. (Graph 3) 

There are significant differences between Member States in the sectors to which they direct 
aid (Table 3). Aid directed at the manufacturing and service sectors represented 75% or more 
of  overall  aid  in  Italy,  Malta,  Sweden  and  Slovakia.  Aid  to  the  agricultural  and  fisheries 
sectors  accounted  for  60%  or  more  of  total  aid  in  Austria,  Estonia,  Finland,  Latvia  and 
Lithuania  while  the  share  of  aid  to  the  coal  industry  was  relatively  high  in  Spain  (28%), 
Germany (18%) and Poland (17%). 

11 

For the purposes of the Scoreboard, the manufacturing sector includes aid for steel, shipbuilding, other 
manufacturing  sectors,  aid  for  general  economic  development  and  aid  for  horizontal  objectives 
including research and development, SMEs, environment, energy saving, employment and training for 
which  the  specific  sector  is  not  always  known.  As  a  result,  data  on  aid  to  manufacturing  may  be 
overestimated.  

EN 

12 

   EN 

 
                                                 
Graph 1: Total State aid by sector, EU-25, 2004 

Agriculture  and 
Fis he rie s
24%

Coal
9%

Trans port 
e xcluding 
railw ays
2%

M anufacturing 
and s e rvice s
65%

Note: (Potentially) distortive State aid as defined under Article 87(1) EC Treaty that has been granted by the EU-
25  Member  States  for  all  sectors  except  railways  and  has  been  examined  by  the  Commission.  Source:  DG 
Competition, DG Transport and DG Fisheries and DG Agriculture.  

EN 

13 

   EN 

 
 
Table 3: Sectoral distribution of aid by Member State, 2004 

Manufacturing

EU-25
 BE
 CZ
 DK
 DE
 EE
EL
 ES
 FR
 IE
 IT
 CY
 LV
 LT
 LU
 HU
 MT
 NL
 AT
 PL
 PT
 SI
 SK
 FI
 SE
 UK

59
65
37
71
66
24
66
49
54
33
72
35
25
16
48
63
87
47
32
51
13
46
98
22
75
71

Services
(including 
tourism,
financial, 
media and
culture)
5
4
5
2
4
0
3
1
7
8
5
24
15
0
8
1
0
0
4
0
61
1
0
1
4
0

% of total

Million euro

Agriculture Fisheries

Coal

Transport 
excluding 
railways

Other non-
manufacturing

Total

23
26
47
20
12
76
28
18
26
58
16
29
60
81
45
31
13
45
63
31
24
45
2
74
12
18

1
0
6
1
0
0
2
3
1
0
2
0
0
1
0
0
0
0
0
0
1
0
0
0
0
2

9
0
4
0
18
0
0
28
10
0
0
0
0
0
0
5
0
0
0
17
0
6
0
0
0
1

2
2
0
6
0
0
0
0
2
0
6
0
0
0
0
0
0
8
0
0
0
0
0
3
7
2

1
2
0
0
0
0
1
0
0
0
0
12
0
3
0
0
0
0
0
1
2
2
0
0
2
6

61617
972
352
1375
17236
35
473
3975
8915
951
7037
184
44
122
78
1015
134
1813
1427
2873
1475
250
212
2483
2745
5442

Due to the rounding of figures, the percentages of some Member states do not sum up to exactly 100. Source: 
DG Competition, DG Transport and DG Fisheries and DG Agriculture. 

1.3. 

State aid to the transport sector  

The Commission’s State aid control in the transport sector is rather complex arising from the 
need to take account not only of the general provisions on State aid, but also the special rules 
in  the  Treaty  and  secondary  legislation  dealing  specifically  with  transport,  in  particular 
Article 73 of the Treaty as implemented by Regulations 1191/6912, 1107/7013 and 1192/6914. 
In  addition,  to  reinforce  the  Internal  market  and  economic  and  social  cohesion,  Article  154 
EC Treaty provides for Community support, in the context of open and competitive markets, 
of  trans-European  networks.  Moreover,  many  transport  operators  perform  public  service 
functions and for that benefit from public financing; while Community law, in the transport 
field  in  particular,  does  indeed  contain  a  number  of  mechanisms  effectively  offering  the 

12 

13 

14 

Regulation (EEC) No. 1191/69 of the Council of 26 June 1969 on action by Member States concerning 
the obligations inherent in the concept of a public service in transport by rail, road and inland waterway. 
Regulation (EEC) No. 1107/70 of the Council of 4 June 1970 on the granting of aid for transport by rail, 
road and inland waterway. 
Regulation  (EEC)  No.  1192/69  on  common  rules  for  the  normalisation  of  accounts  of  railway 
undertakings  is  particularly  important  from  a  State  aid  monitoring perspective  as  it  exempts  from  the 
notification  procedure  a  number  of  different  compensations  from  public  authorities  to  railway 
undertakings. 

EN 

14 

   EN 

 
 
                                                 
possibility  for  Member  States  to  provide  services  of  general  economic  interest  (SGEI),  the 
Commission must check that the public financing granted complies with the rules laid down 
in order to ensure that this financing does not distort competition. States are also involved in 
financing  transport  infrastructure,  and  this  is  raising  more  and  more  questions  about  the 
application of the State aid rules with the development of the commercial operation of certain 
infrastructures  (ports,  airports,  etc.).  The  Commission  is  having  to  develop  and  specify  its 
practice,  distinguishing  in  particular  between  infrastructures  used  by  an  economic  or 
commercial  operator  and  infrastructures  that  are  clearly  connected  with  public  authority 
functions or those that are open to all users on a non-discriminatory basis and which do not 
benefit a particular undertaking. 

For  the  transport  sector  as  a  whole,  excluding  railways,  around  €1.5  billion  of  aid  was 
awarded per year over the period 2002-2004, a slight increase on the annual average over the 
period 2000-2002. These data refer to the EU-15 Member States only as comprehensive data 
on all existing aid to the transport sector are not yet available for the ten new countries (Table 
4). 

More than 60% of total transport aid (around €1 billion per year) was awarded to the maritime 
sector  during  the  period  2002-2004.  The  largest  amounts  were  given  by  Denmark,  France, 
Sweden and the United Kingdom. 

Before liberalisation of the airline sector, considerable amounts of aid (exceeding €2.5 billion 
in  1994  and  1995)  were  awarded  to  national  airlines  for  restructuring  in  the  mid-nineties. 
Since  1997,  however,  aid  levels  to  the  industry  have  fallen  dramatically  though  some  aid 
continues to be authorised. Over the period 2002-2004, an annual average of €330 million of 
aid  was  awarded  to  the  air  transport  sector  (Table  4).  The  increase  as  compared  to  the 
previous period is mainly due to the rescue aid package for Alitalia in 2004. 

Table 4: State aid to the transport sector (excluding railways), EU-15, 2000-2004 

Transport sector

Road and combined transport
Maritime transport
Inland water transport
Air transport
Total

Annual average 2000-
2002

Annual average 2002-
2004

€ million

170
905
5
265
1 345

207
1012
6
332
1 557

Note: Comprehensive data on all existing aid to the transport sector are not yet available for the ten new Member 
States. Source: DG Energy and Transport 

Railways 

Much of the public financing of the railways is not notified to the Commission, either because 
the financing, due to the lack of liberalisation of the sector, is not deemed by Member States 
to  constitute  State  aid  within  the  meaning  of  Article  87(1)  of  the  Treaty,  or  because  it 
represents compensation for public services in accordance with Regulation 1191/69. Member 
States  are  however  required  to  report  to  the  Commission  overall  public  expenditure  to  this 
sector. Disparities between Member States may reflect different interpretations of the scope of 
this annual reporting exercise (Table 5). 

EN 

15 

   EN 

 
 
Table 5: Subsidies(1) to the railway sector, 1998-2004  

EU-15
BE
DK
DE
EL
ES
FR
IE
IT
LU
NL
AT
PT
FI
SE
UK

1999
20.188
1.783
120
5.218
514
1.061
4.577
41
3.822
112
1.693
15
9
357
763
104

2000
21.367
1.815
181
4.760
446
1.112
4.857
206
4.578
134
1.974
13
8
330
817
137

2001
29.029
1.843
197
4.871
625
1.107
6.146
219
5.045
162
2.613
13
13
283
816
5.077

2002
27.107
1.905
213
4.887
552
1.098
6.244
277
5.483
178
2.865
16
15
331
844
2.198

in million current €
2003
25.281
2.024
202
4.433
636
1.089
4.890
321
4.268
201
3.232
13
35
407
954
2.577

2004
24.710
1.909
243
3.475
n.a.
1.119
6.205
180
3.920
207
2.668
n.a.
36
488
1.121
3.141

(1) Includes all public subsidies that have been communicated to the Commission as well as subsidies that have 
been  notified  and  authorised  by  the  Commission  under  relevant  State  aid  rules.  However  the  figures  exclude 
compensation  for  services  of  general  economic  interest.  Data  for  EL,  AT  and  ten  new  Member  States  are  not 
available for 2004. Source: DG Energy and Transport. 

See also section 4.4 on legislative and policy developments in the transport sector. 

1.4. 

State aid to the agriculture and fisheries sectors 

The total amount of State aid awarded to the agricultural sector by the EU-25 Member States 
was estimated at just over €14 billion in 200415. France (€2.3 billion), Germany (€2 billion) 
and  Italy  (€1.1  billion)  reported  the  highest  figures.  The  data  are  based  on  a  new  annual 
reporting exercise introduced for the first time this year16.  

Expenditure figures are currently not available by type of aid measure (investment aid, crisis 
management etc) used by the various Member States in the agricultural sector. However, an 
analysis of the 1 277 decisions taken by the Commission between 1 June 2000 and 1 October 
2005  provides  a  useful  overview  of  the  situation  in  the  EU-15  Member  States.  These 
decisions  involved  1  717  new  aid  measures  which  comprise  aid  schemes  and  (rather  rare) 
one-off  support  measures  for  individual  companies.17  Notifications  frequently  cover  more 
than one type of aid. For example, investment aid may be combined with aid for consultancy 
costs. 

Of  the  total  1  717  aid  measures,  523  or  30%  were  notified  by  Italy  followed  by  Germany 
(246), Spain (287) and France (288). 

15 

16 
17 

Based  on  2003  data  for  Luxembourg  and  Portugal  (no  data  received  for  2004)  and  Italy  (incomplete 
report) 
Commission Regulation (EC) No 794/2004 of 21 April 2004, Annex IIIB 
This analysis is limited to notifications made from 1 June 2000 onwards. Not all of the 1 717 measures 
are still in force. Also, Member States may still apply measures introduced before June 2000. 

EN 

16 

   EN 

 
 
                                                 
Table 6: Main types of aid measure for the agricultural sector, EU-15, 2000-2005 

Type of aid 

On-farm investment 

Processing & market invest. 

Producer group start up 

Technical support (1) 

Crisis management (2)² 

Research & development 

Promotion & advertising 

Other 

Total 

Number  of  new  aid  measures  in 
EU 15 Member States 

June 2000 – Sep 2005 

% of total 

186 

125 

58 

366 

494 

78 

100 

310 

1 717 

11 

7 

3 

21 

29 

5 

6 

18 

100 

support 

consists  of: 

(1)  Technical 
aid 
(2) Crisis management consists of natural disaster, adverse weather, animal diseases, TSE, BSE, plant disease, 
insurance premia, closing of production and rescue & restructuring. Note: A more comprehensive table broken 
down  by  Member  State  and  more  detailed  types  of  aid  measure  will  be  available  on  the  online  Scoreboard. 
Source: DG Agriculture. 

aid,  quality  products: 

technical 

control 

soft 

and 

The total amount of State aid awarded to the fisheries sector by the EU-25 Member States was 
estimated at around €500 million of which Italy and the United Kingdom each accounted for 
€120 million and Spain €100 million. 

1.5. 

State aid to the coal and steel sectors 

The European Coal and Steel Community Treaty expired on 23 July 2002 upon which a new 
Council  Regulation  was  established  as  the  new  legal  framework  for  state  aid  to  the 
Community coal industry.18  

The overall amount of State aid to the coal sector in the Union stood at €5.6 billion in 2004. 
The underlying trend is downward with the annual average dropping from €7.6 billion for the 
period 2000-2002 to €7.2 billion for the period 2002-2004. Germany contributed most to this 
fall (Table 7). The decrease over this period would have been even larger had it not been for 
the exceptional award of aid in Poland in 2003 (around €4 billion).  

In 2004, around 55% of the total related to current production. As from 2003, aid to current 
production  has  decreased  significantly  and  steadily  in  line  with  the  agreements  on  the 
reduction of volumes of aid to the coal industry until 2005. The total amount of aid to current 
production to be granted annually shall in any event not exceed the amount of aid authorized 

18 

Council Regulation (EC) No 1407/2002 of 23 July 2002. In addition, the provisions of Article 88 EC 
Treaty and Council Regulation (EC) No 659/1999 also apply. 

EN 

17 

   EN 

 
 
 
                                                 
by the Commission for the reference year 2001. In 2004, production aid per employee in the 
EU was much lower than in previous years as the new Member States, of which Poland has 
by far the most workers (around 100,000 underground), did not grant production aid, with the 
exception of Hungary.  

Eight  Member  States19  granted  aid  to  the  coal  sector  in  2004,  including  four  new  Member 
States:  Germany  (€  3  billion),  Spain  (€  1.1  billion),  France  (€  890  million),  Poland  (€  490 
million), Hungary (€ 48 million), the United Kingdom (€ 29 million), the Czech Republic (€ 
14 million) and Slovenia (€14 million). With regard to Germany, the Commission approved 
the restructuring plan for the period 2003-2005, which foresees a reduction in total aid from € 
3.3 billion in 2003 to € 2.7 billion in 2005. Spain also notified a restructuring plan concerning 
the period 2003-2005, but the Commission has opened an investigation procedure and has not 
yet approved the aid measures. For France, aid measures were approved to cover the costs of 
closure of the last underground mines in France which closed in April 2004. For the United 
Kingdom, the Commission has approved an investment aid scheme covering the period 2003-
2005 which amounted to just under € 90 million.  

Broadly-speaking, coal mining in the new Member States is more competitive than in the EU-
15 Member States. Poland has by far the largest coal industry and produces far more than the 
rest of the EU together. The Commission approved a long term restructuring plan aiming as 
well to deal with inherited liabilities of the past amounting to € 1.5 billion for the period 2004 
-  2006.  For  Hungary,  the  Commission  approved  a  long  term  restructuring  plan,  which 
contains  the  granting  of  production  aid,  up  to  2010  to  the  value  of  €255  million.  For  the 
Czech  Republic,  the  Commission  approved  aid  measures  not  related  to  production  but  to 
inherited liabilities of the past up to 2007 amounting to € 74 million.  

Table 7: State aid to coal mining, 2000 - 2004 

Yearly average of aid destined to 
current production (in million €)

Yearly average of aid not 
destined to current production
(in million €)

2000 -2002

2002 - 2004

2000 -2002

2002 - 2004

4441
-
3003
755
367
-
213
-
-
103

3980
-
2498
597
202
-
676
-
-
8

3110
1
1244
827
686
16
319
11
5
0

3210
6
832
552
748
24
1013
16
2
17

EU-25
CZ
DE
ES
FR
HU
PL
SI
SK
UK

Note: The Commission has not yet approved the aid to the Spanish coal industry for 2003. Source: DG Energy 
and Transport 

State  aid  to  the  steel  sector  fell  dramatically  in  the  EU-15  Member  States  from  an  annual 
average  of  around  €2  billion  in  the  mid-nineties  to  €58  million  in  1998  after  which  it  has 

19 

Slovakia reported aid to the coal sector for the period 2000-2003 

EN 

18 

   EN 

 
 
                                                 
remained relatively stable. A total of €12 million was awarded in 2004 almost exclusively for 
environmental  purposes.  Of  the  new  Member  States,  the  Czech  Republic  (€177  million  in 
2003),  Slovakia  (€74  million)  and  Poland  (€500  million  in  2003  though  none  in  2004) 
continue to award significant amounts of aid.  

1.6. 

State aid to the shipbuilding sector 

The  amount  of  State  aid  to  the  shipbuilding  sector  fell  from  an  annual  average  of  €1127 
million  for  the  period  2000-2002  to  €688  million  for  the  period  2002-2004.  The  highest 
amounts of aid were given to the restructuring of public yards in Spain in 2000 (just over €1 
billion).  In  2004,  an  estimated  €540  million  was  granted  to  the  EU-25  shipbuilding  sector 
mainly by Germany (27% of the EU total), Italy (24%) and Poland (22%). 

1.7. 

State aid for horizontal objectives 

State  aid  for  horizontal  objectives,  i.e.  aid  that  is  not  granted  to  specific  sectors,  is  usually 
considered as being targeted to market failures and as being less distortive than sectoral and 
ad hoc aid. Research and development, safeguarding the environment, energy saving, support 
to  small  and  medium-sized  enterprises,  employment  creation,  the  promotion  of  training  and 
aid for regional economic development are the most prominent horizontal objectives pursued 
with State aid. Due to data constraints, which the Commission aims to resolve in 2006, this 
section looks at horizontal objectives in the context of total aid less agriculture, fisheries and 
transport. 

In around half the EU Member States, more  than 90%  of all the aid  awarded  in  2004 
was for horizontal objectives 

On  average,  aid  earmarked  for  horizontal  objectives,  accounted  for  76%  of  total  aid  less 
agriculture,  fisheries  and  transport  in  2004.  The  four  main  horizontal  objectives  were 
environment  and  energy  saving  (25%  of  total  aid),  regional  economic  development  (18%), 
R&D (12%) and SMEs (12%) – see Table 8.  

The remaining 24% was aid directed at specific sectors: coal (12%), manufacturing (9%) and 
services  (3%)20  including  aid  to  rescue  and  restructure  ailing  firms.  In  interpreting  these 
figures, however, it is important to bear in mind that some aid measures can not be quantified 
(see  section  1.1).  Another  factor  that  keeps  the  volume  of  sectoral  and  individual  aid 
artificially low is that Commission decisions which follow an unlawful aid procedure21 tend 
to refer to aid that was granted up to several years previously and involve ad hoc awards of 
aid to individual companies. Although the data for all years are adjusted retrospectively when 
the Commission takes its decision, the overall level is underestimated. 

In twelve Member States, more than 90% of all the aid awarded in 2004 was earmarked for 
horizontal  objectives.  In  another  group  of  Member  States  (Spain,  France  and  Ireland)  the 
share  was  around  60%  while  in  several  others  the  share  was  significantly  lower:  Hungary 
(48%), Cyprus (46%), Slovakia (35%), Poland (26%), Portugal (22%) and Malta (8%). The 
low share of horizontal aid (and thus relatively high share of sectoral aid) in Portugal was due 
to a large regional aid tax scheme in Madeira. In Ireland, although aid awarded through the 

20 

21 

These percentages exclude those measures with a horizontal objective that are nevertheless earmarked 
for the manufacturing and services sectors 
Such cases are denoted by a ‘NN’ case number 

EN 

19 

   EN 

 
                                                 
Irish Corporation Tax22 has decreased significantly it still accounts for a relatively high share 
of total aid. France, Germany, Poland and Spain have relatively high shares of aid to the coal 
sector although the low share of horizontal aid in France is due mostly to the large award of 
aid to Alstom23 while in Germany the large guarantee provided as a part of the restructuring 
package to Bankgesellschaft Berlin AG24 in 2002 is another important factor. For a number of 
the new Member States, the disparity can be explained in part by the relatively strong support 
of several industries (e.g., financial sector, coal and steel) before accession in the context of 
privatisation  or  to  ensure  viability.  For  example,  faced  with  a  general  banking  crisis,  the 
Czech Republic paid out €2.6 billion in 2002 in the form of guarantees in order to restructure 
and subsequently privatise several banks. In Cyprus, aid was mainly granted through tax relief 
under  the  International  Business  Enterprises  Act  (almost  60%  of  total  aid  over  the  period 
2000-2003).  In  Malta,  restructuring  aid  to  shipbuilding  and  the  ship  repair  sector  accounted 
for  around  50%  of  total  aid  prior  to  accession.  Furthermore,  it  should  be  noted  that  in 
countries with relatively low overall aid levels, the grant of a single, relatively large ad hoc 
aid may cause large variations. 

Large  disparities  between  Member  States  in  the  share  of  aid  awarded  to  various 
horizontal objectives 

When making comparisons between Member States, it is important to bear in mind that aid 
measures are classified according to their primary objective at the time the aid was approved 
and  not  to  the  final  recipients  of  the  aid.  Notwithstanding  the  measurement  difficulties,  the 
data  do  give  an  indication  as  to  which  horizontal  objectives  are  favoured  by  each  Member 
State  (see  Table  8).  For  example,  the  share  of  total  aid  directed  exclusively  to  research  and 
development in the Netherlands, Finland, Austria, Estonia, Czech Republic and Belgium was 
more  than  twice  the  EU  average  of  12%.  Meanwhile,  Sweden  (88%  of  total  aid),  Denmark 
(54%),  the  Netherlands  (52%)  and  Germany  (44%)  tended  to  favour  environmental  and 
energy saving objectives (EU average 25%). For the Union as a whole, 12% of total aid was 
made up of measures for which the primary objective was SMEs. In addition, €1.2 billion of 
aid,  3%  of  total  aid,  was  directed  exclusively  at  SMEs  as  a  ‘secondary’  objective.  For  the 
most  part,  the  primary  objective  of  these  aid  measures  was  R&D.  Combining  primary  and 
secondary objectives, 39% of aid in Italy was earmarked exclusively for small and medium-
sized  enterprises,  38%  in  Belgium  and  34%  in  the  United  Kingdom  compared  with  an  EU 
average of 15%. 

22 

23 
24 

The  rate  of  corporation  tax  in  Ireland  has  been  cut  progressively  in  recent  years  and  is  12.5%  from 
2003. This has reduced the comparative value of the preferential 10% rate to the manufacturing sector, 
therefore contributing to the decline, in monetary terms, of aid to this sector. 
C58/2003 
C28/2002 

EN 

20 

   EN 

 
                                                 
Table 8: State aid for horizontal objectives and sectoral aid, 2004 

Percentage of total aid less agriculture, fisheries and transport

Horizontal 
Objectives R&D

Environm
ent and 
energy 
saving

     SME

Employme
nt aid

Training 
aid

Regional 
developm
ent n.e.c. 
(1)

76
100
82
97
78
100
97
62
59
62
95
46
100
49
100
45
8
96
96
26
22
70
35
98
100
99

12
25
33
1
11
21
2
13
15
10
18
2
0
2
19
2
0
25
28
1
3
18
0
25
4
16

25
2
2
54
44
1
8
3
2
2
1
1
0
0
0
0
0
52
18
1
0
19
0
38
88
27

12
33
10
0
3
3
12
12
19
3
34
1
8
12
21
4
3
14
23
0
8
2
0
8
1
22

4
4
0
38
1
0
4
1
4
12
7
0
0
0
0
1
0
1
5
13
1
17
0
6
0
0

3
8
0
0
0
0
0
1
1
3
13
5
0
0
0
0
1
0
6
0
4
3
2
0
0
5

18
23
36
0
18
31
67
31
14
20
20
5
92
34
31
26
0
4
13
10
5
6
32
15
3
26

Other 
horizontal 
objectives
3
4
0
3
1
44
5
1
4
12
4
32
0
1
30
10
4
1
3
0
0
5
1
6
5
3

Sectoral 
aid (2)

     Coal

Manufactu
ring

Services

24
0
18
3
22
0
3
38
41
38
5
54
0
51
0
55
92
4
4
74
78
30
65
2
0
1

12
0
8
0
20
0
0
35
14
0
0
0
0
0
0
7
0
0
0
25
0
10
0
0
0
1

8
0
0
3
1
0
2
2
25
27
3
37
0
35
0
48
92
4
3
48
0
17
65
0
0
0

3
0
10
0
1
0
0
0
2
11
2
3
0
0
0
1
0
0
1
0
78
0
0
2
0
0

EU-25
 BE
 CZ
 DK
 DE
 EE
EL
 ES
 FR
 IE
 IT
 CY
 LV
 LT
 LU
 HU
 MT
 NL
 AT
 PL
 PT
 SI
 SK
 FI
 SE
 UK

Total aid 
less 
agricultur
e, 
fisheries 
and 
transport 
in million 
€
45.461
685
165
1003
15128
8
330
3136
6348
393
5415
131
17
23
43
696
117
854
524
1972
1114
137
207
571
2231
4211  

(1)  Aid  for  general  regional  development  not  elsewhere  classified.  (2)  Aid  for  specific  sectors  awarded  under 
measures for which there was no horizontal objective as well as aid for rescue and restructuring. Figures under 
sectoral  aid  also  include  aid  to  other  non-manufacturing  sectors  not  included  in  the  table.  Source:  DG 
Competition. 

1.8. 

Trend in State aid for horizontal objectives 

In the mid-1990s, when State aid levels were much higher, the share of total aid granted for 
horizontal  objectives  was  around  50%.  In  line  with  the  commitments  undertaken  at  the 
various  European  Councils,  Member  States  have  however  continued  to  redirect  aid  towards 
such  horizontal  objectives.  The  share  of  horizontal  objectives  in  total  aid  increased  by  4 
percentage  points  (+7  points  for  the  EU-15  Member  States)  between  2000-2002  and  2002-
2004. This upward trend was almost exclusively the result of a significant increase in aid for 
environmental and energy saving objectives (+6 points) as well as a reduction in sectoral aid, 
particularly coal, for some Member States. 

The  positive  trend  was  observed,  to  varying  degrees,  in  the  majority  of  Member  States, 
particularly in Ireland (+16 points), Spain (+14 points) and the United Kingdom (+11 points). 
In  contrast,  the  share  in  Poland  went  down  considerably  due  to  the  large  amount  of  aid 
awarded to the coal sector in 2003. 

Over  the  period  under  review,  there  were  appreciable  increases  in  the  share  of  total  aid  for 
environmental and energy saving objectives in Sweden (+41 points), Finland (+16 points), the 
United Kingdom (+14 points) and Germany (+10 points) - see special focus in Part Two and 
in particular Tables 12 and 13. For the Union as a whole, there was no significant change in 
the  share  of  aid  for  other  horizontal  objectives  such  as  R&D  and  SMEs.  However, 

EN 

21 

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expenditure patterns have changed in some Member States. For example, in the UK the share 
of aid directed at SMEs increased significantly. 

1.8.1. 

State aid for research and development (R&D) 

Investment  in  R&D  is  a  crucial  factor  to  make  the  EU  economy  competitive  and  to  ensure 
sustainable  growth.  The  Barcelona  European  Council  of  March  2002  recognised  this  by 
setting the objective for expenditure on R&D to 3% of GDP by 2010. In addition, two thirds 
of  this  expenditure  should  be  funded  by  the  private  sector.  Following  this,  the  spring  2004 
European Council stressed in particular that besides public funding, increased private funding 
of investment is crucial to achieve a sustainable level of 3% and accorded priority status to the 
strengthening of business investment in R&D. 

National  governments  have  a  range  of  measures  to  choose  from  to  fund  and  consequently 
trigger R&D, the exact range and balance of which depend on the national context and form 
the policy mix. These public measures, when granted on a selective basis, might contain State 
aid. Even though State aid constitutes only a small part of public R&D funding, competition 
could be distorted by favouring some enterprises over others. On the other hand, state aid may 
in  certain  circumstances  be  the  best  available  option  to  provide  incentives  triggering 
additional private R&D investment. The Commission thus tries to strike a balance through the 
application  of  the  framework  on  R&D  aid  thereby  ensuring  that  R&D  is  furthered  to  the 
largest extent while minimising distortions of competition as far as possible.  

Figures  for  2003  show  that  investment  in  R&D  is  not  sufficient  to  meet  the  Barcelona 
objectives:  for  the  Union  as  a  whole,  R&D  investment  stood  at  1.9%  of  GDP,  Sweden  and 
Finland  being  the  only  countries  to  reach  the  3%  level  with  4.0  and  3.5%  respectively. 
Drawing conclusions from the so far sluggish development of R&D investment, it is clear that 
with  growth  remaining  at  the  current  level,  the  European  economy  will  not  achieve  the 
Barcelona targets by 2010. Rather, growth needs to be accelerated and new impetus given to 
investment in R&D. 

As regards (potentially) distortive State aid to R&D, total expenditure stood at €5.5 billion in 
2004. After a significant increase in 2001, the level of R&D aid has remained rather stable. 
State  aid  to  R&D  represents  a  relatively  small  share  in  public  funding  (EU-wide,  0.05%  of 
GDP  in  2004)  although  there  are  significant  differences  between  Member  States.  With  the 
exception of Slovenia and Czech Republic, the share of aid directed at R&D in the ten new 
Member States is comparatively low. 

EN 

22 

   EN 

 
Table 9: State aid for research and development (R&D) 

Aid to 
Research & 
Development  
(in million €), 
2004

Share of 
R&D aid in 
total aid, 
annual 
average 
2002-2004

Share of R&D 
aid in total aid 
(% point 
difference 
2000-2002 and 
2002-2004)

Share of R&D aid 
to GDP (in %), 2004

EU-25
 BE
 CZ
 DK
 DE
 EE
EL
 ES
 FR
 IE
 IT
 CY
 LV
 LT
 LU
 HU
 MT
 NL
 AT
 PL
 PT
 SI
 SK
 FI
 SE
 UK

5553,4
173,7
54,9
13,6
1595,2
1,8
5,7
403,9
958,0
39,3
951,6
3,2
-
0,5
8,1
13,1
-
217,2
147,2
25,2
33,3
24,3
0,8
144,7
82,6
655,8

12
22
3
2
10
20
1
11
19
10
15
1
-
1
13
2
-
28
33
1
2
21
2
29
6
21

0,4
5,4
1,0
-2,7
0,6
10,7
1,1
3,2
-1,4
6,0
0,6
0,3
-
0,0
-2,3
-1,3
-
2,0
-2,3
-1,1
1,3
6,4
-3,4
-4,5
-13,2
-2,1

0,05
0,06
0,06
0,01
0,07
0,02
0,00
0,05
0,06
0,03
0,07
0,03
-
0,00
0,03
0,02
-
0,05
0,06
0,01
0,02
0,09
0,00
0,10
0,03
0,04

Source: DG Competition. 

1.9. 

State aid supporting regional development and cohesion 

Each Member State targets part of  its State aid towards the least developed regions, the so-
called  ‘assisted  regions’.  For  the  Union  as  a  whole,  an  estimated  €12.3  billion  of  aid25  was 
earmarked  exclusively  for  assisted  ‘a’  regions26  in  2004.  The  discrepancy  with  the  figure 

25 

26 

This  figure  includes  all  aid  specifically  earmarked  for  assisted  ‘a’  regions  regardless  of  the  overall 
objective of the aid. However, due to an absence of data on the final beneficiaries of the aid, it is not 
possible  to  quantify  the  amount  of  aid  granted  through  nation-wide  schemes  from  which  assisted 
regions will also clearly benefit. See spring 2003 update of the Scoreboard for further information on 
methodological issues. 
Article 87(3)(a) provides that aid “to promote the economic development of areas where the standard of 
living  is  abnormally  low  or  where  there  is  serious  underemployment”  may  be  considered  compatible 
with the common market. The ‘a’ regions are largely identical to the Objective 1 regions under the EU 
Structural Funds. 

EN 

23 

   EN 

 
 
                                                 
published in previous Scoreboards is due to enlargement. With the exception of Cyprus, and 
the  cities  of  Prague  and  Bratislava  which  qualify  for  assistance  at  ‘c’  level27,  the  entire 
territories of the  ten new Member States  are  eligible at ‘a’ level. Although a number  of  aid 
measures in these countries are not earmarked for a specific region, the aid is thus deemed to 
be ‘reserved for’ assisted regions. 

The EU-wide figure of €12.3 billion represented 27% of total aid (less agriculture, fisheries 
and  transport  for  which  a  regional  breakdown  is  not  available).  Disparities  between  the 
Member States in the levels of aid reserved for assisted ‘a’ regions (Table 10) reflect not only 
differences in regional policy but also the size of each country’s eligible population as well as 
the extent to which each Member State grants aid at a sub-central level. 

Table 10: State aid specifically earmarked for assisted ‘a’ regions, 2004 

Total state aid less 
agriculture, fisheries 
and transport, mio €

Aid for assisted 'a' 
regions, mio €

Aid for assisted 'a' 
regions as a 
percentage of total 
aid less agriculture, 
fisheries and 
transport

EU-25
CZ
DE
EE
GR
ES
FR
IE
IT
LV
LT
HU
MT
AT
PL
PT
SI
SK
FI
UK

45.461
165
15.128
8
330
3.136
6.348
393
5.415
17
23
696
117
577
1.972
1.114
137
207
571
4.211

12.339
92
3.040
8
330
1.210
853
345
2.151
17
23
696
117
21
1.972
953
137
143
4
266

27
56
20
100
100
39
13
88
40
100
100
100
100
4
100
85
100
69
1
6  

Note: There are no assisted ‘a’ regions in B, DK, L, NL and S. For CZ, ES, IE, PT, SK, all measures qualify for 
either ‘a’ or ‘c’ status. The figures in the table above refer to those measures which were specifically earmarked 
for ‘a’ regions. In Cyprus, all measures qualify for ‘c’ assisted status. All data exclude agriculture, fisheries and 
transport for which a regional breakdown is not available. It is therefore not possible to measure aid to assisted 
‘a’ regions as a proportion of total State aid. Source: DG Competition. 

27 

Article 87(3)(c) 

EN 

24 

   EN 

 
 
                                                 
1.10.  Aid awarded under the block exemption regulations 

With a view to reducing the administrative burden for specific types of aid, block exemptions 
for aid to SMEs, training aid, employment aid, certain types of aid in the fisheries sector and 
aid to SMEs in the agricultural sector have come into force over the past few years.28 As one 
would expect, the number of notifications for these types of aid has fallen as Member States 
make  increasing  use  of  the  possibilities  offered  by  the  block  exemption  regulations.  By  the 
end of 2004, more than 800 information sheets had been submitted (Table 11). Almost two-
thirds of the exempted measures concerned aid for SMEs. Five Member States, Italy (26% of 
the  total),  the  United  Kingdom  (22%),  Germany  (11%),  Spain  (8%)  and  Belgium  (7%) 
accounted for 75% of all exempted measures in 2004.  

Table 11: Trend in the number of aid measures submitted under the block exemption 
regulations 

Type of block exemption 
regulation

2001

2002

2003

2004 

Total

Year

SME
Training
Employment
Total number

101
48
0
149

124
81
0
205

139
53
8
200

150
79
21
250

514
261
29
804

Figures exclude cases withdrawn and cases submitted under the block exemption regulation for fisheries (1 in 
2004) and agriculture (72 in 2004). Source: DG Competition. 

As regards expenditure, an estimated €3.4 billion was awarded in 2004 under the three block 
exemption regulations. This represents around 10% of all aid directed at horizontal objectives 
though for several Member States the share was considerably higher: Belgium 14%, Greece 
16%, Poland 21%, United Kingdom 22% and Italy 31%. 

The  overall  figure  of  €3.4  billion  was  made  up  of  €2.1  billion  to  SMEs,  €1.1  billion  to 
training aid and €0.2 billion for employment aid.  

1.11. 

State aid instruments 

Majority  of  Member  States  tend  to  provide  aid  to  manufacturing  and  services  in  the 
form of grants …  

All State aid represents a cost or a loss of revenue to the public authorities and a benefit to 
recipients.  However,  in  some  cases  the  actual  aid  element  may  differ  from  the  nominal 
amount as in the case of a subsidised loan or guarantee.  

28 

Commission  Regulations  (EC)  No  70/2001  of  12  January  2001  on  State  aid  to  SMEs  (OJ  L  10, 
13.01.2001, pages 33-42); No 68/2001 of 12 January 2001 on training aid (OJ L 10, 13.01.2001, pages 
20-29);  No  2204/2002  of  5  December  2002  on  State  aid  for  employment  (OJ  L  337,  13.12.2002, 
pages 3-14). No 1/2004 of 23 December 2003 on State aid to SMEs in the agricultural sector (OJ L 1, 
03.01.2004, pages 1-16). 

EN 

25 

   EN 

 
 
                                                 
Graph 2: Share of each aid instrument in total aid for manufacturing and services, 
EU-25, 2002 – 2004 

Tax exem ptions
32,4%

Tax deferrals
3,1%

Soft loans
5,0%

Guarantees
10,3%

Equity participation
1,3%

Grants
47,9%

Note: This section on aid instruments excludes the coal sector. Source: DG Competition 

… though significant differences still exist in the use of instruments 

During  the  period  2002-2004,  grants  accounted  for  just  under  50%  of  total  aid  in  the 
manufacturing and service sectors. In addition to aid awarded through the budget, other aid is 
paid through alleviation from the tax or social security system. Tax exemptions made up 32% 
of the total (Graph 2). While Belgium, Denmark, Estonia, Luxembourg and Austria provided 
at least 85% of their aid in the form of grants, other Member States tended to make greater 
use of tax exemptions: accounting for 75% or more of total aid in Cyprus, Lithuania, Portugal 
and  Slovakia.  A  similar  instrument  is  a  tax  deferral  which  was  used  by  just  under  half  the 
Member States during the period under review. Tax deferrals accounted for 19% of all aid in 
Italy compared with an EU average of 3%. 

There are other forms of aid instrument which vary from one Member State to another. One 
such category covers transfers in which the aid element is the interest saved by the recipient 
during  the  period  for  which  the  capital  transferred  is  at  his  disposal.  The  financial  transfer 
takes the form of a soft loan or tax deferral. The aid elements in this category are much lower 
than the capital values of the transfers. EU-wide, soft loans represented around 6% of all aid 

EN 

26 

   EN 

 
 
to  manufacturing  and  services.  In  Finland,  France,  Malta  and  the  United  Kingdom  the 
proportion was 10% or more. 

Aid may also be in the form of state equity participation which represented around 1% of all 
aid  to  the  manufacturing  and  service  sectors.  Finally,  aid  may  be  provided  in  the  form  of 
guarantees. The aid elements are generally much lower than the nominal amounts guaranteed, 
since  they  correspond  to  the  benefit  which  the  recipient  receives  free  of  charge  or  at  lower 
than market rate if a premium is paid to cover the risk. EU-wide, guarantees made up 10% of 
total aid. During the period under review, large guarantees were awarded in particular to the 
banking sectors in Germany (18% of total aid) and Czech Republic (80% of total aid). 

2. 

PART  TWO:  SPECIAL  FOCUS  ON  STATE  AID  FOR  THE  ENVIRONMENT  AND  ENERGY 
SAVING 

Introduction 

The  earth’s  ability  to  absorb  pollution  and  continue  providing  natural  resources  is  limited. 
Protecting the environment is crucial for the quality of life of current and future generations. 
Although the EU’s primary goals were economic development and free trade, environmental 
aspects have also been taken into account. Environmental action by the Community began in 
1972  with  four  successive  action  programmes.  In  1993,  environmental  protection  became  a 
recognised  policy  as  part  of  the  Treaty  on  European  Union.  Furthermore,  the  Treaty  of 
Amsterdam  (which  entered  into  force  1999)  recognized  the  principle  of  sustainable 
development as one of the EU’s aims.  

Competition policy also recognised the importance of environmental policy at an early stage – 
the  first  rules  on  granting  State  aid  for  environmental  purposes  were  established  in  197429. 
Initially, aid could be authorized mainly to help undertakings to make necessary investments 
to  achieve  certain  mandatory  minimum  standards.  The  evolution  of  environmental  State  aid 
policy  has  limited  this  kind  of  aid  in  order  to  introduce  the  ‘polluter  pays  principle’,  which 
requires  that  economic  agents  must  bear  the  full  cost  of  the  pollution  caused  by  their 
activities. 

2.1.1.  Policy context and rationale for environmental and energy policy 

Environmental policy 

The legal basis for EU environmental policy is laid down in Articles 6 and 174-176 of the EC 
Treaty. Article 174 establishes four main objectives of the Union policy on the environment: 
preserving, protecting and improving the quality of the environment; protecting human health; 
prudent and rational utilisation of natural resources; and promoting measures at international 
level  to  deal  with  regional  or  worldwide  environmental  problems.  In  order  to  achieve  these 
objectives,  the  EU  has  introduced  Environmental  Action  Programmes.  The  6th  programme, 
entitled  Environment  2010:  Our  Future,  Our  Choice30  covers  the  period  2001  to  2010  and 
identifies four environmental  areas to be tackled for improvements: Climate change, Nature 
and  biodiversity,  Environment  and  health  and  quality  of  life,  and  Natural  resources  and 

29 
30 

Commission memorandum on State aid in environmental matters. SEC(74) 4264 of 6 November 1974. 
Decision No 1600/2002/EC of the European Parliament and of the Council of 22 July 2002 laying down 
the Sixth Community Environment Action Programme was published in OJ L 242 of 10.9.2002 

EN 

27 

   EN 

 
                                                 
waste.The key priority for the Sixth Environmental Action Programme is the implementation 
of  the  Kyoto  Protocol  to  cut  greenhouse  gas  emissions  by  8%  below  1990  levels  by  2008-
2012.  The  Programme  identifies  the  system  of  trading  of  emission  allowances  ("emission 
trading")  as  one  of  the  appropriate  instruments  to  meet  this  target.  The  programme  stresses 
the importance of protecting the nature and bio-diversity, which are under the risk due to the 
pollution, unsustainable use of the land and sea. 

Lisbon Strategy and Environmental Policy  

Beyond  the  above  improvements,  environmental  policy  can  also  contribute  to  economic 
development.  Environmental  policy  and  eco-innovation  are  an  essential  part  of  the  Lisbon 
Strategy  because  they  can  promote  sustainable  economic  growth,  maintain  and  create  jobs, 
and  contribute  to  the  long-term  competitiveness  of  the  EU  economy.  Based  on  the  Lisbon 
mid-term  review  ‘package’,  the  March  2005  Summit  concluded  that  appropriate  resources  - 
including  cohesion  policy  -  must  be  mobilised  to  a  greater  degree  in  the  Strategy's  three 
dimensions (economic, social and environmental) and synergies must be developed. The June 
2005  Summit  then  approved  a  set  of  Integrated  Guidelines  for  Growth  and  Jobs  2005-2008 
which include a specific guideline (number 11) on the environment31. 

Implementation of policy by Member States 

Although  EU  legislation  has  done much to improve environmental quality, to create a level 
playing  field  for  companies  across  the  EU,  and  to  help  promote  new  market  opportunities, 
there is still room for improvement. Full implementation of the EU environmental legislation 
by Member States remains a challenge, including in the new Member States. By the end of 
2004, environment cases accounted for one quarter of all open cases for non implementation 
of EU law. The Commission services analysed the main areas of difficulty (waste, water, air, 
nature protection and environmental impact assessment) and are now drawing up action plans 
aimed at improving implementation of environmental community law. 

EU Energy Policy  

The  objective  of  the  European  Union’s  energy  policy  is  to  ensure  a  supply  of  energy  to  all 
consumers  at  affordable  prices  while  respecting  the  environment  and  promoting  healthy 
competition  on  the  European  energy  market.  A  sustainable  energy  policy  aims  at  reducing 
harmful emissions, mainly NOX, SOX and CO2, which are emitted every time fossil fuels are 
burnt, and at reducing the dependency of the European Union on energy imports. The angle of 
attack  the  Commission  proposes  is  twofold:  first,  it  proposes  to  reduce  the  overall  energy 
consumption; second, it aims at producing as much energy as possible from renewable energy 
sources.  

In  2005,  the  Commission  adopted  a  Green  paper  on  Energy  efficiency,  which  describes 
possible courses of action towards a reduction of the overall energy consumption. At the same 
time, different legislative acts have already started to implement that aim, either by imposing 
energy-efficient  standards  (e.g.,  for  buildings,  cars  and  electronic  appliances),  or  by  giving 

31 

Integrated  Guidelines  For  Growth  And  Jobs  (2005–2008),  Communication  to  the  Spring  European 
Council Working Together for Growth and Jobs, http://europa.eu.int/growthandjobs/index_en.htm 

EN 

28 

   EN 

 
                                                 
economic incentives for less energy-intensive production and thus also reduced environmental 
impacts (e.g., directive on energy taxation,32 directive on emission trading33). 

As  far  as  the  promotion  of  renewable  energy  is  concerned,  the  Community  has  set  itself 
ambitious  targets  for  the  production  of  electricity  from  renewable  energy  sources  (directive 
2001/77/EC) and from combined heat and power (directive 2004/8/EC). The energy taxation 
directive  foresees  the  promotion  of  biofuels  through  lower  taxation,  and  the  Commission  is 
planning to present an action plan on biomass. 

2.1.2.  Environmental measures – when do they constitute State aid? 

Member  States  have  introduced  a  wide  range  of  national  environmental  policy  measures  to 
protect  the  environment:  to  limit  pollution  (air,  water  and  soil),  protect  natural  resources, 
promote renewable energy resources, manage waste etc. Most of these objectives are targeted 
through  general  measures,  i.e.  applied  throughout  a  particular  country  without  regional  or 
sectoral  selectivity.  However,  there  are  also  environmental  measures  or  exemptions  from 
general  measures  (e.g.,  environmental  tax  relief)  which  favour  certain  companies  or  the 
production  of  certain  goods.  Such  selective  measures  may  distort  competition  between 
companies and it is therefore important that the benefits of environmental protection measures 
are well balanced with the distortion of competition they cause. 

EU  State  aid  policy  is  aimed  at  avoiding  disproportionate  State  support  measures  which 
unduly distort competition. Member States are required to notify to the Commission all State 
aid  measures  before  putting  them  into  effect.  The  Commission  analyses  State  support 
measures  in  two  steps:  1)  whether  the  measure  constitutes  State  aid  within  the  meaning  of 
Article 87(1) of the EC Treaty, and if yes, 2) whether such potential distortion of competition 
is justified and balanced. If the aid is justified and compatible with common market and the 
distortion of competition is marginal, the Commission approves the aid measure. 

As  any  measure  imputable  to  public  authorities,  an  environmental  support  measure  is 
considered  to  be  a  State  aid  measure  as  defined  under  Article  87(1)  of  the  EC  Treaty  if  it 
fulfils all the following four criteria34: 

– 

– 

– 

– 

Transfer of state resources 

Advantage for the undertaking 

Selectivity 

Distortion to competition and effect on trade between Member States 

In  some  instances,  the  interpretation  as  to  whether  one  or  other  criteria  is  fulfilled  and  thus 
whether  or  not  the  measure  constitutes  State  aid  is  difficult  and  complex.  Some  examples 
relevant for environmental measures are given below.  

32 

33 

34 

Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the  Community  framework  for  the 
taxation of energy products and electricity 
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a 
scheme for greenhouse gas emission allowance trading within the Community and amending Council 
Directive 96/61/EC 
See explanation ‘What is a State aid’ in State aid Scoreboard Spring 2004 update, COM(2004) 256 final 

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Transfer of state resources includes grants from the central, regional or local government’s 
budget,  revenue  forgone  i.e.  environmental  tax  relief  or  government  authorities  selling 
(buying) environment related goods and services or land below (above) market price. Transfer 
of state resources criteria is also fulfilled in case of a fund which is set up by the State and 
which  is  financed  by  contributions  imposed  and  managed  by  the  State.  For  example,  the 
Netherlands set up two measures called MEP (Milieukwaliteit van de Electriciteits Productie) 
to  support  Dutch  producers  of  renewable  electricity35  and  of  combined  heat  and  power 
(CHP)36. As the measures were financed through a compulsory contribution by all electricity 
consumers in the form of an increased connection fee and the contributions were collected to 
the  state  established  fund,  the  Commission  decided  that  the  measures  constitute  State 
resources in the light of Article 87(1) and therefore the measures were considered to be State 
aid for Dutch energy producers.  

In the PreussenElektra case37, the Court of Justice decided that to the extent that the German 
law  imposed  on  private  electricity  distributors  to  pay  a  higher  feed-in  price  for  electricity 
generated from renewable sources, it does not involve transfer of State resources. The crucial 
element  for  the  Court  appeared  to  have  been  that  the  German  electricity  pricing  system 
required private companies to pay other companies a higher price for renewable electricity, so 
the resources involved were coming from private companies. There was no State body or fund 
established  by  the  State  to  collect  and  redistribute  the  benefits  as  it  was  in  the  above-
mentioned  Dutch  case  promoting  renewable  electricity  and  combined  heat  and  power 
measure.  

The Commission considers also the emission trading instruments such as quotas, allowances, 
certificates and credits to be intangible assets for recipients if they are tradable in the market. 
When  the  State  on  its  own  initiative  allocates  such  assets  free  of  charge,  the  allocation  can 
constitute  State  aid.  For  the  first  trading  period  (2005-2007),  the  emission  trading  scheme 
(ETS)38  obliges  Member  States  to  allocate  at  least  95%  of  the  allowances  free  of  charge. 
Thus,  Member  States  can  sell  at  maximum  5%  of  the  allowances  at  market  price.  If  the 
Member State does not use this possibility and hands over also the 5% of allowances to the 
companies free of charge, then it is considered as State revenue forgone and therefore it might 
constitute State aid.39 

Most environmental support measures constitute also an advantage for the undertaking, but 
in  some  cases  the  Commission  has  found  that  there  is  no  advantage.  For  instance,  in  the 
Netherlands case Waste disposal system for car wrecks40, the Commission found that there is 
no economic advantage for the companies and therefore no State aid. The aim of the waste 
management system is to ensure that the companies that produce and sell cars also take the 
responsibility for a high degree of recycling of car wrecks. This measure corresponds to the 
polluter pays principle. Dutch government has declared that all car producers and importers 
have to pay charge for each car which is registered in the Netherlands. The resources are paid 
to car dismantling companies. As the charge for car producers and importers and premiums to 

35 
36 
37 
38 
39 

40 

MEP Stimulating Renewable Energy, N707/2002. 
MEP Stimulating combined heat and power production (CHP), N 708/2002. 
Case C-379/98 Preussen Elektra AG v Schleswag AG. 
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 
See National allocation plans for Emissions trading: 
http://www.europa.eu.int/comm/environment/climat/emission_plans.htm 
Waste disposal system for car wrecks C11/2001 (ex N629/2000)  

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the dismantling companies are corresponding to the cost of recycling, the Commission found 
that there is no advantage and State aid for car producers nor for car dismantling companies. 

Generally  it  is  recommended  to  avoid  discrimination  and  selectivity  in  state  support 
measures, so that they can be considered as general measures and not as State aid measures. 
One  contrary  example  is  the  Adria-Wien  Pipeline  GmbH  case41  concerning  an  Austrian 
legislative  measure,  which  provides  tax  exemptions  from  energy  taxes  on  natural  gas  and 
electricity.  Although  the  measure  was  established  in  the  context  of  an  overall  package  of 
measures  to  consolidate  the  budget,  and  exemptions  were  based  on  objective  automatic 
criteria without the administrative authorities having any discretionary power in selecting the 
beneficiaries,  and  the  measure  gave  benefits  for  a  very  large  number  of  undertakings,  the 
Court  of  Justice  found  that  the  measure  is  selective.  One  of  the  main  reasons  for  this 
conclusion  was  that  the  tax  exemption  is  applied  only  for  undertakings  whose  activity  is 
mainly  in  the  manufacturing  sector.  The  Court  of  Justice  found  that  the  ecological 
considerations underlying the national legislation does not justify treating the consumption of 
natural gas or electricity by undertakings supplying services differently than the consumption 
of such energy by undertakings manufacturing goods, the damage to the environment is the 
same. The Court stated that undertakings in the services sector may, just like undertakings in 
the manufacturing sector, be major consumers of energy and incur high level of energy taxes 
and  therefore  they  are  in  disadvantaged  position.  Based  on  these  arguments  the  Court  of 
Justice regarded these measures to be selective and to be state aid within the meaning of the 
Article 87(1) of the EC Treaty. 

2.1.3.  Market failure and justification for environmental State aid 

In  some  instances,  markets  do  not  lead  to  an  efficient  solution,  for  example,  in  the  case  of 
negative externalities such as pollution. Such negative externalities arise when undertakings 
do  not  take  into  account  in  their  production  decisions  the  full  cost  of  the  action  such  as 
nuisance or harm to others. From the society’s point of view, it is desirable to internalize such 
externalities,  i.e.  to  make  the  price  of  goods  reflect  the  real  production  costs,  including  the 
costs  of  damage  to  environment.  Classical  examples  of  measures  to  internalize  externalities 
are environmental standards or environmental taxes. If the price of goods is increased thanks 
to  such  measures,  then  most  probably  the  production  and  consumption  of  environmentally 
unfriendly goods and also pollution would decrease.  

Member  States  have  various  possibilities  to  remedy  the  market  failures.  The  first  and  most 
favoured one should be the use of general measures that do not constitute State aid and distort 
competition. If this is not possible, Member States may develop State aid measures, which are 
in compliance with the internal market and can be approved by the Commission. The above-
mentioned  prohibition  to  grant  State  aid,  established  by  the  Article  87(1),  is  not  absolute 
because  Articles  87(2)  and  (3)  provide  exemptions  under  which  the  granting  of  State  aid  is 
justified.  The  Commission  assesses  the  justification  and  the  compatibility  of  national 
environmental  aid  measures  according  to  the  Community  Guidelines  on  State  Aid  to 
Environment (hereafter the ‘Environmental Guidelines’)42. 

The Environmental guidelines recognize two main instances where State aid may be justified. 
Firstly, temporary aid to help internalisation of costs. As mentioned above, the internalisation 

41 
42 

Case C-143/99 
Community Guidelines on State Aid for Environmental Protection, OJ  C 37, 03.02.2001, p. 3-15 

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of the cost of pollution is mainly done by the introduction of environmental taxes, Emission 
Trading Schemes or by environmental standards. However, some undertakings, in particular 
SMEs,  may  not  be  able  to  bear  the  extra  financial  burden  (environmental  tax  or  increased 
investment cost to apply the standards) immediately. Therefore, the guidelines justify granting 
aid to SMEs in order to adapt to new Community environmental standards, for a period of 3 
years  from  the  adoption  of  such  standards.  Secondly,  the  Environmental  guidelines  foresee 
the  possibility  to  grant  aid  to  encourage  undertakings  to  make  investments  to  reach  higher 
environmental  standards  than  community  standards  or  to  undertake  further  investment  to 
reduce pollution from their plants or for the development of renewable energy sources.  

The  guidelines  also  allow  operating  aid  for  specific  purposes.  If  a  Member  State  has 
introduced a high level of environmental taxes in the absence of Community harmonised tax 
or of a level higher than the tax envisaged by the Community legislation, then, under certain 
conditions  ensuring  an  environmental  counterpart,  guidelines  justify  the  awarding  of 
environmental  tax  exemptions  for  companies  for  a  maximum  of  10  years.  For  further 
available options, see box below. 

Brief summary of the Community Guidelines on State aid for Environmental Protection 

The compatibility of State aid for environmental protection and energy is governed by Community Guidelines 
on State Aid for Environmental Protection (OJ C 37, 03.02.2001, p. 3-15).  

Under  the  Environmental  Guidelines  Members  States  may,  after  Commission  approval,  grant  aid  for  actions 
designed  to  remedy  or  prevent  damage  to  our  physical  surroundings  or  natural  resources  or  to  encourage  the 
efficient use of these resources.  

The following categories of State aid are justified:  

Aid  for  investment  to  adapt  to  new  compulsory  EU  environmental  standards  or  to  improve  on  such 
standards 

In accordance with the polluter pays principle, the Commission takes the view that aid is no longer justified in 
the case of investments designed to bring companies into line with new Community standards.  

However, in order to address the special difficulties encountered by SMEs, it remains possible to grant them aid 
for adapting to new Community standards, for a period of 3 years from the adoption of such standards. Such aid 
may be authorized up to a maximum of 15% of eligible costs. 

Investment aid may also be authorized to enable firms to improve on the Community standards, or where firms 
undertake  investments  in  the  absence  of  mandatory  standards,  or  where  they  have  to  comply  with  national 
standards that are more stringent than the Community standards applicable. In these cases, aid may be authorised 
up to 30% of the eligible costs. The eligible costs must be strictly limited to the extra costs of the investments in 
land, buildings,  equipment  and  intangible  assets  necessary to  achieve  the  new  compulsory  standards  and/or  to 
meet the environmental objectives. In all cases, the eligible costs must be calculated net of the benefits accruing 
from any increase in capacity, cost savings engendered during the first five years of the life of the investment 
and additional ancillary production during that five-year period. 

Aid  for  investment  in  energy  saving,  in  renewable  sources  of  energy  and  in  combined  heat  and  power 
installations (CHP) 

The Guidelines give the Member States the possibility to grant investment aid and operating aid. Member States 
may grant aid to promote investments concerning renewable energy, up to 40% of the eligible costs. On the top 
of  that, bonus of  10%  may  be  granted  to  SMEs,  firms  located  in  assisted regions,  and for  energy  installations 
serving all the needs of an entire community such an island. 

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32 

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Member States may also grant operating aid, provided it covers strictly the difference between 
the costs of production from renewable energy sources and the market price of that energy (i.e. 
does not result in overcompensation of renewable energy sources), according to 4 options: 

Option 1: The aid may compensate for the difference between the production cost and the market price until the 
total depreciation of the plant. The aid can also cover a fair return on capital if necessary.  

Option  2:  Member  States  can  also  grant  support  by  using  market  mechanisms  such  as  green  certificates  or 
tendering supports.  

Option 3: They can also choose to grant operating aid on the basis of the external costs avoided. 

Option 4: Operating aid can be granted according the general rules for operation aid: aid for a period limited to 5 
years, and in principle, “degressive”.  

Further general conditions on granting operating aid are described below. 

Aid for the rehabilitation of polluted industrial sites 

If  the  person  responsible  for  the  pollution  is  not  identified  or  cannot  be  made  to  bear  the  cost,  the  person 
responsible for the rehabilitation of the land may receive aid. The eligible costs are equal to the cost of the work 
to repair the environmental damage less the increase in the value of the land. 

Aid for the relocation of firms 

Aid for the relocation of companies can be granted only if the change of location is dictated on environmental 
protection  grounds  and  if  it  is  ordered  by  administrative  or  judicial  decision.  In  addition,  the  undertaking 
relocating  must  comply  with  the  strictest  environmental  standards  applicable  in  its  new  location.  The  eligible 
costs should be limited to the net costs of the relocation. 

Operating aid 

Under  the  Community  Guidelines  on  State  aid  for  environmental  protection,  Member  States  can  also  provide 
operating aid in cases where such aid is shown to make a significant contribution to protecting the environment. 

The following types of operating aid may be authorised under the Guidelines: 

- 

- 

- 

- 

Operating  aid  to  promote  environmentally-friendly  forms  of  waste  management  and  to  promoteergy 
saving; 

Operating  aid  in  the  form  of  reductions  of  or  exemptions  from  taxes  levied  on  certain  activities  for 
reasons of environmental protection (e.g. CO2 levy); 

Operating aid to promote renewable energy sources; 

Operating aid for the combined production of electric power and heat. 

Specific conditions to be respected when granting operating aid in the environmental field are set out in detail in 
points 42 to 67 of the Community Guidelines on State aid for environmental protection. 

The eligible costs are strictly limited to the extra production costs by comparison with the market prices of the 
relevant products or services. 

Operating  aid  is  in  principle  limited  to  a  duration  of  5  years.  Where  the  aid  is  “degressive”,  its  intensity  may 
amount to 100% of the eligible costs. Where the aid is “non-degressive” the intensity must be limited to 50% of 
the eligible costs. 

For operating aid in the form of tax reductions or exemptions, specific criteria apply for new taxes and existing 
taxes. 

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2.1.4.  Environmental State aid measures 

Despite the need for control, in the light of the defined environmental objectives and certain 
market  failures  set  out  above,  the  Commission  has  traditionally  adopted  a  rather  favourable 
approach  to  aid  for  environmental  protection.  These  kinds  of  environmental  measures  are 
normally  granted  in  the  form  of  schemes,  not  as  individual  aid.  Certain  types  of 
environmental  measures  are  considered  to  be  less  distortive  of  competition  since  they  are 
undertaken  in  an  area  of  Community  interest.  The  objective  of  such  schemes  can,  for 
example,  be  to  support  renewable  energy,  energy  efficiency  or  waste  management.  These 
measures must be notified to the Commission, but are normally covered by the Community 
Guidelines  on  State  aid  for  environmental  protection.  If  they  comply  with  these  guidelines, 
which amongst others sets out limits on the aid, they can be approved under Article 87(3)(c) 
of the EC Treaty. In the text below, some examples of such support measures are given. 

Environmental and energy measures qualifying as compatible State aid: Case studies 

Support  measures  for  renewable  energy,  for  energy-saving,  for  waste  management,  for 
rehabilitation  of  polluted  industrial  sites  and  for  improvement  of  production  processes 
normally  are  considered  to  be  in  the  interest  of  the  Community.  Relief  from  environmental 
taxes can also be of Community interest, as such taxes may not be introduced, in particular on 
energy-intensive companies, if no relief is allowed. 

Renewable energy 

In,  for  example,  the  Netherlands,  the  production  of  electricity  from  renewable  energy  sources  is 
amongst others stimulated by a feed-in tariff43. The measure aims at stimulating demand for renewable 
energy  resulting  in  an  increase  in  consumption  and  production  of  renewable  energy.  This  will 
contribute to the achievement of the national targets for the reduction of CO2 emission as agreed in the 
Kyoto Protocol to the United Nations Framework Convention on Climate Change. The publicly owned 
operator of the national high-voltage grid is given the task of distributing subsidies to the producers of 
renewable energy. The subsidies for electricity produced from renewable energy compensates for the 
difference between the production cost of electricity produced from renewable energy sources and the 
market  price  of  conventional  electricity.  The  level  of  subsidy  varies  for  the  different  forms  of 
renewable electricity generation based on the difference of the production costs of the specific form of 
renewable  energy  (wind,  solar  etc)  and  the  electricity  market  price  of  conventional  electricity.  The 
subsidy  is  capped  at  €  0.07  per  kWh  and  is  financed  through  a  compulsory  contribution  by  the 
electricity  consumers,  imposed  by  legislation.  The  fees,  which  are  collected  by  the  network 
controllers,  are  transferred  each  month  to  the  grid  operator,  who  keeps  the  money  separately  in  a 
current account. The Commission considered that the measure constitutes State aid within the meaning 
of Article 87(1). The measure was found to be in line with the Environmental guidelines (in particular 
point 59). As the objective of the measure clearly is in the interest of the Community and there is no 
over-compensation, the measure was found to be compatible with the common market in accordance 
with Article 87(3)(c).  

Energy-saving 

In  Spain,  support44  to  promote  investments  in  renewable  energy  and  energy  efficiency  has  been 
provided  since  2001.  The  objective  of  the  support  is  among  others  to  achieve  a  contribution  from 

43 
44 

N 760/95, OJ C 70, 8.3.1996, p. 6 
State aid No. N 188/2005 (not yet published in the OJ). That measure replaces, modifies and prolongs 
State aid No. N 459/2001, not yet published in the OJ, N 460/2001, not yet published in the OJ, and N 
198/2002, OJ C 65, 19.3.2003, p. 23 

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renewable  energy sources of 12 % of the demand of primary energy in 2010 and a reduction of the 
energy intensity by 7.2 % in 2012. As a consequence of the scheme, a reduction of 300 000 tonnes per 
year of CO2 emissions is expected. Aid is provided in the form of a direct grant. Under the scheme, 
investments in renewable energy can receive support of between 10 and 30 % of the reference costs, 
while  investments  in  energy  efficiency  can  receive  support  of  40  %  of  the  reference  costs.  The 
maximum gross aid intensity is in all cases limited to 40 % of the eligible costs (plus a regional bonus 
of  5  %  or  10  %  in  certain  eligible  regions  and  a  bonus  of  10  %  for  SMEs).  Eligible  investments  in 
energy efficiency can, for example, be investments in better energy saving and substitution of energy 
in  the  industry,  investments  in  energy  efficiency  in  buildings,  energy  efficiency  in  the  public  sector 
and  public  transport,  non-industrial  cogeneration  and  reuse  of  residuals  as  energy.  The  Commission 
found that the measure constitutes State aid which is compatible with the common market since it is in 
line with the Environmental guidelines (in particular points 30, 32, 36 and 37). 

Waste management 

In 2002, the French government introduced an aid scheme for the elimination of dangerous waste for 
the  water45.  The  objective  of  the  scheme  is  to  preserve  the  water  resources  by  promoting  the 
elimination  of  waste  that  can  pollute  the  subsurface  and  surface  water  or  disturb  the  functioning  of 
municipal purification plants. In order to achieve that objective, the scheme aims at orienting the waste 
pollutants, which are normally put in a disposal, in the relevant elimination procedures, successful at 
the  technical  level  and  optimal  at  the  environmental  level.  The  aid  is  provided  to  enterprises  that 
produce  the  waste,  when  these  enterprises  treat  the  waste  in  appropriate  procedures  in  order  to 
significantly reduce the potential pollutant. It is granted in the form of grants which are calculated on 
the basis of the difference between the cost of the treatment of the waste in the dedicated procedure 
and the cost of elimination of the same waste by disposal. Each beneficiary can benefit from the aid 
for  maximum  5  years,  either  as  a  fixed  level  of  50 %  during  that  period  or  at  an  aid  level  which  is 
degressive in a linear manner from 100 % to 0 % during the 5 year period. The scheme was found to 
be  in  line  with  the  Environmental  guidelines  (particularly  points  42  to  46).  Since  the  scheme  is 
covered  by  the  Environmental  guidelines  and  does  not  lead  to  over-compensation,  the  Commission 
approved the scheme on the basis of Article 87(3)(c). 

Rehabilitation of polluted industrial sites 

In May 2002, the Austrian government introduced a scheme with the objective to support the clean up 
and rehabilitation of polluted industrial sites46. The investment aid is provided in the form of grants. 
Aid under the scheme may amount to up to 100 % of the eligible costs, plus 15 % of the cost of the 
work.  Eligible  costs  under  the  scheme  will  always  be  directly  linked  to  the  rehabilitation  and 
safeguarding (including planning, etc) of polluted industrial sites. The eligible costs are equal to the 
cost of the work less the increase in the value of the land. Since the scheme is in line with point 38 of 
the Environmental guidelines and does not lead to over-compensation, the Commission approved the 
scheme on the basis of Article 87(3)(c). 

Investment aid to improve production processes 

In  Germany,  a  measure  promoting  investments  to  create  new  methods  of  production  which  have 
special environment relevance was introduced in 200347. The measure aims at resources-preservation 
and  creation  of  more  efficient  production  processes  as  well  as  a  production  with  less  environment-
impairing  consequences.  The  scheme  focuses  on:  (1)  the  introduction  of  innovative  production 
processes and an efficient use of natural resources and the reduction of emissions and waste, (2) the 
substitution  and  avoidance  of  environment-impairing  materials  used  in  the  production  process,  (3) 

45 
46 
47 

State aid No. N 496/2002, OJ C 108, 7.5.2003, p. 5 
State aid No. 9/2002, OJ C 164, 10.7.2002, p. 4 
N 559/2002, OJ C 76, 28.3.2003, p. 27 

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limiting volatile organic compounds in the production process, (4) pilot projects aiming at reducing of 
the energy consumption in the production process and (5) innovative plants for the treatment and use 
of  waste.  The  aid  is  granted  in  form  of  grants  or  soft  loans  and  is  limited  to  investments  aiming  to 
achieve significantly higher levels of environmental protection than is required by current standards. 
The loans run over a period of 13 years at an interest of 3 % per year. Taking into account the present 
reference rate of Germany of 5.06% results in an aid intensity of a loan of 13.4% gross. If the market 
interest changes considerably, the interest rate may be raised up to max 10% per year.The maximum 
aid intensity is 30% gross of the eligible costs. If the investment is carried out by SMEs, an extra 10% 
percentage  points  gross  of  aid  is  allowed  which  then  will  amount  up  to  a  maximum  of  40%. 
Furthermore, in regions which are eligible under Article 87(3)(c), firms may receive additional aid of 
5%  gross.  The  eligible  costs  concerns  tangible  investments  and  spending  on  technology  transfer. 
Eligible  costs  are  only  the  extra  investment  costs  which  are  necessary  to  meet  environmental 
objectives  in  order  to  exceed  existing  mandatory  standards.  To  achieve  this,  the  beneficiaries  are 
obliged  to  calculate  separately,  according  to  an  objective  and  transparent  method,  those  extra 
investment costs necessary to meet the environmental objectives. Excluded from support are costs not 
attributable to environmental protection as for example costs for the basic investment. The conditions 
of  the programme  were  in  accordance  with  the  Environmental guidelines (in  particular points 29-30 
and 34-37). Therefore, the scrutiny by the Commission led to the conclusion that the trade conditions are 
not affected to an extent contrary to the common interest. 

Relief from environmental taxes 

In Sweden, there is a relatively high tax on energy, the objective of which is to increase energy saving 
and  energy  efficiency.  In order,  for  environmental  reasons,  to  have  relatively high  energy  tax  levels 
and at the same time maintain the competitiveness of the manufacturing sector, tax relief is allowed 
for  the  manufacturing  industry.  A  lower  tax  rate  applies  for  electricity  used  in  the  production  of 
companies  in  the  manufacturing  sector48.  The  Commission  has  approved  the  relief  as  it  was  in  line 
with  the  Environmental  guidelines  as  well  as  with  the  “Energy  Tax  Directive”49.  According  to  the 
guidelines, non-degressive tax exemptions covering a 10-year period from environmental taxes can in 
certain cases be justified when a Member State introduces a new tax in the absence of a harmonised 
Community tax or when the tax in a Member State exceeds that laid down by Community legislation. 
In the Swedish case, the lower tax rate remains higher than the applicable minimum level. Therefore, 
the  Commission  considered  the  notified  aid  scheme  to  be  compliant  with  the  Energy  Tax  Directive 
and with the Environmental guidelines (particularly points 51.1(b) and 51.2) and it was thus approved 
on the basis of Article 87(3)(c).  

In addition to this general energy tax relief for electricity consumed during the production process, the 
Swedish  authorities  introduced  in  2004  a  system  with  voluntary  agreements  on  energy  saving  with 
energy-intensive  companies50.  For  these  companies,  a  zero-tax  rate  on  electricity  used  in  their 
production processes will be applied under the condition that they participate in a 5-year programme 
for  increased  energy.  The  programme  imposes  certain  obligations  to  be  fulfilled  by  the  companies 
during  the  programme  and  penalty  provisions  in  case  these  obligations  are  not  fulfilled.  The 
obligations  are  considered  to  replace  the  steering  effect  of  the  energy  tax  on  electricity  used  in  the 
production  processes  of  the  undertakings.  The  fact  that  energy  costs  constitute  an  important  part  of 
these companies’ total costs is an additional incentive for the companies to implement energy-saving 
measures.  Since  the  scheme  was  found  to  be  in  line  with  the  conditions  of  the  Environmental 
guidelines  (in  particular  point  51.1(a))  and  with  the  Energy  Taxation  Directive,  the  Commission 
authorised the scheme on the basis of Article 87(3)(c). 

48 
49 

50 

State aid No. N 156/2004, OJ C 137, 4.7.2005, p. 5 
Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the  Community  framework  for  the 
taxation of energy products and electricity OJ L 283, 31.10.2003, p. 51 
N 253/2004, OJ C 136, 3.6.2005, p. 43 

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2.1.5. 

State aid expenditure on the environment 

As  pointed  out  above,  not  all  environmental  and  energy  saving  support  measures  are 
considered  to  be  State  aid  measures.  Total  expenditure  by  Member  States  on  State  aid 
measures  for  the  environment  and  energy  saving  amounted  to  €  11.4  billion  in  2004.  This 
figure  makes  up  25%  of  total  state  aid  less  state  aid  to  agriculture,  fisheries  and  transport. 
Table  12  shows  that  Member  States’  State  aid  expenditure  for  environment  and  energy 
objectives  has  increased  year  by  year  starting  from  €1.3  billion  in  1994  to  €11.4  billion  in 
2004. 

Table 12: Trend in the level of State aid for environmental and energy saving purposes 

Environment and energy 
saiving aid, in million €
Environment and energy 
saiving aid as % total aid less 
agriculture, fisheries and 
transport
Environmental aid granted 
through tax exemptions as % 
total aid less agriculture, 
fisheries and transport
Environmental aid granted 
through grants as % total aid 
less agriculture, fisheries and 
transport

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1247

1402

1266

1272

1370

3305

5801

6564

7256

9438

11384

2,1

2,5

2,2

1,7

2,8

8,6

12,6

14,0

13,8

19,3

25,1

0,1

0,1

0,5

0,3

0,6

5,4

8,2

9,4

9,6

14,6

19,5

1,9

2,2

1,6

1,3

2,0

3,0

4,0

4,3

3,8

4,2

5,3  

Note: Data for 1994-1999 exclude the ten new Member States. Source: DG Competition 

The  three  largest  environmental  and  energy  saving  aid  grantors  in  absolute  terms  were 
Germany (€6.6 billion), Sweden (€2 billion) and United Kingdom (€1.1 billion). These three 
countries  granted  more  than  85%  of  the  total  aid  in  2004.  In  relative  terms,  the  EU 
environmental and energy state aid amounted to 0.1% of EU Gross Domestic Product (GDP) 
in 2004 (Table 13). The biggest aid grantors in relative terms were Sweden (0.7% of GDP), 
Germany (0.3%) and Denmark (0.28%). 

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Table 13: State aid for environmental and energy saving purposes 

Share of 
environmental and 
energy saving aid 
in total aid less 
agriculture, 
fisheries and 
transport, annual 
average 2002-2004

% point difference 
in this share (2000-
2002 and 2002-
2004)

Aid for environmental 
and energy saving (in 
million €, 2004)

11384,1
16,9
3,2
541,5
6644,8
0,1
25,9
100,0
137,5
6,6
34,9
1,7
0,0
-
0,0
2,3
-
446,6
94,8
10,6
1,7
26,2
0,0
215,4
1956,9
1116,6

19,1
1,1
2,2
51,4
33,8
0,4
3,9
2,0
3,7
1,0
2,1
1,0
0,0
-
0,1
3,0
-
41,8
20,5
1,5
0,1
23,5
0,0
35,1
78,4
21,9

5,6
-0,4
0,5
1,1
9,5
-18,9
3,8
0,9
-1,3
0,7
1,7
0,4
-0,4
-
-1,2
-1,3
-
6,1
4,3
-2,2
-0,1
9,2
-1,9
16,2
40,6
14,5  

EU-25
 BE
 CZ
 DK
 DE
 EE
 GR
 ES
 FR
 IE
 IT
 CY
 LV
 LT
 LU
 HU
 MT
 NL
 AT
 PL
 PT
 SI
 SK
 FI
 SE
 UK

Source: DG Competition 

Around 70% of environmental and energy saving aid in Germany in 2004 was granted under 
the  ecological  tax  reform51  through  tax  reductions/exemptions  from  the  mineral  oil  tax  and 
from  the  tax  on  electricity.  In  1999,  Germany  introduced  a  tax  on  the  consumption  of 
electricity  and  increased  the  mineral  oil  tax.  In  order  to  give  transitional  relief  for  some 
sectors and companies, Germany introduced also partial reductions from the eco-taxes. 

Sweden granted in 2004 almost 70% of the environment and energy saving aid through two 
measures. First, the “Modification of CO2 tax reduction for the manufacturing industry”52 was 
introduced  to  maintain  the  present  CO2  tax  level  for  the  manufacturing  industry  when  the 

51 
52 

See Commission decision on Ecological tax reform case, N249/2001. 
“Modification of CO2 tax reduction for the manufacturing industry” N 484/2003 

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general  tax  rate  was  increased.  Second,  the  “Energy  tax  on  electricity  used  by  the 
manufacturing sector53” is a tax exemption from the energy tax. 

In 2004, Member States granted on average around 75% - 80% of environmental and energy 
saving aid through tax exemptions. Germany, Sweden, Finland and Slovenia provided 82% of 
environmental and energy saving aid in the form of tax exemptions. Two countries used tax 
deferrals  as  an  instrument  to  grant  environmental  and  energy  state  aid:  Ireland  (100%)  and 
Netherlands  (31%).  Almost  20%  of  EU-25  environmental  and  energy  saving  aid  was 
transferred in the form of grants. Seven countries (Austria, Cyprus, Estonia, Greece, Hungary, 
Italy and Spain) used only grants as an aid instrument to grant environmental and energy state 
aid. Other aid instruments such as soft loans, equity participation and guarantees were used by 
Member States to a lesser extent. 

In conclusion, the underlying trend in expenditure on environmental and energy saving aid is 
clearly upward: the annual average increased from € 6.5 billion in the period 2000-2002 to € 
9.3  billion  during  the  period  2002-2004.  While  such  aid  is  clearly  directed  at  a  commonly 
accepted  horizontal  objective,  only  a  relatively  small  proportion  comprises  aid  to  make 
investments  that  reach  higher  environmental  standards  than  community  standards  or  to 
undertake further investment to reduce pollution or for the development of renewable energy 
sources.  On  the  other  hand,  a  large  proportion  of  aid  (accounting  for  around  80%  of  total 
environmental and energy saving aid in 2004) comprises tax exemptions of which the largest 
part  had  to  be  accepted  in  order  to  allow  for  certain  types  of  environmental  taxes  to  be 
introduced,  e.g.,  to  limit  the  impact  of  such  taxes  on  the  competitiveness  of  specific 
companies or sectors. Although the tax exemptions from environmental  taxes  do not  aim at 
reaching higher environmental standards, such exemptions are only allowed where the taxes 
themselves are intended to make a significant contribution to protecting the environment and 
the exemptions should not undermine the general objectives pursued. Such exemptions have 
been used in particular by Germany, Sweden and the United Kingdom. 

2.1.6.  Revision of environmental guidelines 

The current Environmental Guidelines are applicable until the end of 2007. The Commission 
has  started  reviewing  the  current  guidelines  in  order  to  prepare  new  guidelines  for 
environmental aid. As a starting point, the Commission published a questionnaire54 in August 
2005 and invited all Member States and other interested parties to share their experience with 
the current guidelines. The questionnaire included a wide range of questions, such as: whether 
a  block  exemption  for  environmental  aid  should  be  introduced;  which  categories  of 
environmental aid should be included; should the polluter-pays principle be strengthened and 
less  aid  for  polluting  undertakings  approved;  whether  the  possibility  to  grant  aid  for 
environmental  innovation  should  be  introduced,  etc.  The  Commission  will  analyse  the 
answers and draw up the conclusions in the new draft guidelines for environmental aid, which 
will be discussed with Member States.  

53 
54 

“Energy tax on electricity used by the manufacturing sector” N 156/2004 
http://europa.eu.int/comm/competition/state_aid/others/00910_questionnaire_env_en.pdf 

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3. 

PART THREE: EXPLORING ALTERNATIVES TO STATE AID 

In  the  context  of  reducing  overall  levels  of  State  aid,  the  conclusions  of  various  European 
Councils have also invited Member States to consider ways in which this may be achieved. 
For example, the Brussels European Council in November 2002 invited Member States in its 
conclusions to “consider before granting State aid whether it is targeted on a clearly identified 
market  failures  or  directed  at  horizontal  objectives  of  common  interest  …  and  whether  an 
intervention in the form of State aid is the most appropriate and effective way to address these 
issues”. 

One of the best ways to reduce state aid is clearly to make better use of alternative measures 
such  as  general  and  regulatory  measures.  Before  resorting  to  State  aid,  which  should  in 
general  only  be  the  “second  best”  option,  Member  States  should  verify  whether  it  would 
represent the most appropriate solution. Some types of alternative instrument not only help to 
avoid  distortions  to  competition,  but  also  support  Member  States  efforts  to  restore  and 
maintain healthy public finances, which is also one of the main pillars of the Lisbon Strategy 
for Growth and Jobs.  

Another approach to reducing state aid is to target it carefully to problem areas and to limit its 
extent to the necessary amount, time and effective means. Problem areas could in principle be 
situations where the market fails to produce economically efficient outcomes as set out in the 
State Aid Action Plan. Identifying the market failure at stake provides a better opportunity to 
evaluate whether state aid could be justified and acceptable. Furthermore, state aid should be 
designed  so  that  it  solves  the  market  failure  effectively,  by  creating  an  incentive  effect  and 
ensuring it is proportionate. 

How can Member States ensure that their state aid policies are pursuing these objectives? The 
answer  lies  to  a  large  extent  in  the  granting  procedures  and  practices  of  State  aid  in  the 
Member  States.  With  a  view  to  developing  best  practices  that  support  a  “less  and  better 
targeted” state aid policy, the following questions may be worth addressing:  

To what extent does a Member State assess whether or not State aid is the most appropriate 
form of intervention? At what stage does such an assessment take place? When and what sort 
of analysis is carried out to ensure that taxpayers’ money in the form of State aid measures is 
spent  effectively  and  efficiently?  What  alternatives  to  State  aid  are  Member  States  using  or 
developing? What kind of institutional setup supports these goals? 

A  number  of  these  issues  were  the  subject  of  a  written  questionnaire  addressed  to  Member 
States by the Commission in May 2005 and discussed at a meeting with State aid experts from 
the  Member  States  in  July  2005.  This  section  presents  some  of  the  replies  provided  by 
Member States as a first step towards identifying best practices in support of a “less and better 
targeted” state aid policy. 

Exploring alternative instruments in the first place 

A number of Member States referred to explicit policy efforts towards improving the general 
business  environment  such  as  making  changes  to  the  regulatory  environment,  streamlining 
their business support schemes and directing support away from (potentially) distortive State 
aid  towards  general  measures.  Among  the  examples  of  alternative  instruments  quoted  by 
Member States are the following: 

EN 

40 

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– 

– 

– 

– 

– 

– 

The  most  explicit  example  is  in  Sweden  with  its  established  principle  of  restraint 
whereby  subsidies  to  companies  “should  never  be  the  first-choice  solution”  in 
dealing  with  different  issues.  Instead,  alternative  policy  instruments  should  first  be 
analysed and tested regularly. Sweden contends that there are clear indications that 
the policy of restraint has led to an increased use of general measures instead of State 
aid. 

Denmark,  which  has  set  up  an  inter-departmental  government  committee  to  reduce 
the  level  of  aid,  stressed  that  its  industrial  strategy  concentrates  on  improving  the 
general  environment  and  growth  conditions  of  firms,  rather  than  on  helping 
individual firms directly. 

Similar  points  were  made  by  other  countries  such  as  the  Slovak  Republic  which 
underlined  that  individual  assistance  to  enterprises  through  public  spending  is  used 
only in exceptional, clearly warranted cases. 

The  Netherlands  contends  that  budget  constraints  are  forcing  all  aid  awarding 
authorities to explore alternatives or grant less aid. One of the basic questions asked 
when aid is granted is whether or not a financial instrument is the best possible way 
of resolving the problem. Also related to budget considerations, Estonia referred to 
the use of de minimis aid as an alternative means of public support. 

In granting aid within its special economic zones, Poland considers a range of other 
instruments  for  supporting  development,  particular  in  the  field  of  SMEs,  such  as 
business  incubators,  technology  parks  and  clusters  -  which  have  a  ready 
infrastructure  -  and  business  consultations.  A  further  example  is  the  funding  the 
Ministry  of  Infrastructure  provides  for  certain  activities,  including  the  financing  of 
services provided in the general economic interest. The financing of services in the 
general interest by means of a special fund made up of contributions from enterprises 
operating  within  a  particular  sector  could  be  considered  as  an  alternative  form  of 
state intervention. 

Cyprus  has  introduced  a  series  of  legislative  measures  or  general  measures  that  do 
not  constitute  state  aid.  For  example,  the  tax  rate  on  company  profits  has  been 
lowered to 10% and applies universally to all sectors, while, at the same time, other 
measures have been included in tax legislation aiming at the overall improvement of 
the  business  environment.  In  this  way,  the  preferential  treatment  of  offshore 
companies (which constituted state aid) has been phased out. This also made possible 
the elimination of a number of tax exemptions granted to specific sectors. 

Hungary  and  Slovenia  cite  specific  accountancy  and  tax  rules  which  qualify  as 
general  measures  while  the  United  Kingdom  refers  to  its  use  of  public-private 
partnerships  in  which  both  parties  invest  on  equal  terms  and  where  government 
invests commercially. 

Assessing whether a state aid measure is necessary and appropriate  

Many countries also refer to the need for aid to address clearly identified market failures. For 
example, Slovenia indicates that proposals for state aid schemes must be based on established 
needs for state intervention resulting either from market failures or from a shortage of private 
sources of finance and the like. 

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41 

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The Slovak Competitiveness Strategy55, adopted earlier in 2005, stipulates that the “State will 
intervene in the effectiveness of the open market only to the strictly necessary extent and for 
the necessary time, and only in cases where the market is failing and where, in this respect, 
the State can provide publicly required services more efficiently or more fairly”. It goes on to 
say that there are plans to transfer public expenditure from those areas and programmes which 
do  not  correspond  to  the  basic  philosophy  and  objective  of  the  Lisbon  strategy.  Therefore, 
when  the  public  administration  budgets  are  prepared,  there  must  be  a  sufficient  increase  in 
public  finances  available  for  priority  areas,  compensated  by  a  reduction  of  expenditure  in 
other areas. 

In Belgium, the Brussels Capital Region has decided to carry out a root-and-branch reform of 
Brussels legislation on economic expansion with a view to continuing to provide aid that has 
proved  to  be  appropriate,  i.e.  consultancy  aid,  and  aid  for  training  and  employment,  while 
reducing aid that is less clearly appropriate, i.e. general investment aid. 

In  the  Czech  Republic,  some  providers  assess  aspects  similar  to  those  evaluated  in  the 
preparatory  stage  after  the  aid  has  been  granted.  Analyses  of  cost-effectiveness  and 
application  of  the  principle  of  sustainable  development  may  then  lead  to  the  adjustment  of 
measures which are being implemented or even to suspension of the aid provided. The Czech 
Office  for  the  Protection  of  Competition  (UOHS)  is  involved  in  working  groups  which 
regularly meet in order to monitor State aid. In addition to the compatibility of aid with the 
State aid rules, these working groups discuss efficiency and the results of evaluation of the aid 
provided. 

Procedures and practices supporting a policy of “less and better targeted” State aid  

The  majority  of  Member  States  reported  that  they  assess  the  appropriateness  of  the  aid 
measure vis-à-vis other possible instruments at the design or preparatory phase. Although the 
final  decision  as  to  whether  or  not  state  aid  should  be  used  is  made  by  the  aid-granting 
authority,  in  a  number  of  countries  this  authority  has  to  demonstrate  that  it  has  explored 
alternatives to State aid while in other countries the various funding instruments are examined 
by some form of coordinating body. 

Many national monitoring authorities or similar bodies with a coordination function in state 
aid matters seem to be taking an increasingly proactive approach towards raising awareness of 
and  local  expertise  in  State  aid  through  advice,  training,  websites,  newsletters,  guides,  etc. 
While  the  main  focus  of  attention  may  be  towards  compliance  with  the  State  aid  rules,  the 
submission  of  State  aid  notifications,  reporting  and  monitoring,  etc,  such  interaction  should 
also  help  to  ensure  a  more  consistent  and  coherent  approach  towards  assessing  the 
appropriateness of state aid vis-à-vis alternative instruments: 

– 

55 

In Cyprus, for the planning of a state aid measure or scheme, a technical committee - 
composed  of  representatives  of  all  involved  parties,  with  the  participation  of  the 
Finance  Ministry or Planning Office or both - is set up to examine the form of the 
intervention, the size of any grant, the duration of the scheme, the assessment criteria 
etc. The potential effectiveness of the measure in relation to the achievement of the 
objectives set forth is a crucial factor, as is the financial position of the State. 

Slovak  Competitiveness  Strategy  until  2010,  the  National  Lisbon  Strategy’  (Resolution  of  the 
Government of the Slovak Republic No 140 of 16 February 2005) 

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– 

– 

– 

– 

56 

The  United  Kingdom  reported  that  all  government  departments  and  aid  awarding 
authorities  undergo  a  Business  Planning  process  where  each  body  identifies  where 
they  would  focus  their  resources  for  a  defined  period  of  time  and  outline  the 
strategies  that  will  be  employed  to  achieve  the  objectives  set  within  the  resources 
available.  Formal  appraisal  processes  ensure  that  before  resources  are  granted,  the 
rationale, objectives and proposed methodologies of all support measures have been 
scrutinised.  This  helps  to  ensure  that  the  design  of  the  instrument  is  such  that  both 
the  likelihood  of  success  of  the  instrument  and  value  for  public  money  are 
maximised. In addition, Regulatory Impact Assessments (RIA) are obligatory in the 
policy  forming  processes  and  are  considered  to  be  an  important  process  to  help 
analyse  policy  proposals,  determine  the  costs  and  benefits  of  action,  and  decide  on 
the  best  delivery  method.  This  process  applies  whether  or  not  the  assistance  or 
funding from government will constitute a State aid. 

Other Member States including Italy and Belgium referred to similar RIA exercises. 
For example, the Flemish Authority in Belgium described how the preparation of an 
RIA  helps  the  drafters  of  the  regulation,  inter  alia,  to  identify  possible  options  for 
achieving the desired policy objectives and reflect on the anticipated costs, benefits 
and effects of the proposals. As soon as a problem is identified – e.g., in connection 
with the specific situation of a number of firms which have difficulty in investing – 
an investigation is carried into whether this is the result of a market failure. If this is 
the  case,  a  study  is  made  of  the  options available  for  remedying  the  market  failure 
and if some form of state aid should be provided. It is explicitly laid down in the RIA 
that as well as the proposed solutions, alternatives must be found. 

In  Finland,  each  individual  authority  in  the  sector  concerned  is  responsible  for 
assessing the appropriateness of its programme in relation to alternative instruments, 
e.g. when designing the taxation by tonnage the impact of alternative relief models 
was  studied.  If,  as  part  of  the  assessment,  public  funding  has  been  found  to  be  the 
most appropriate method to influence the playing field in which companies operate, 
the Business Support Advisory Committee carries out an assessment of any possible 
overlapping of the proposed aid schemes, as well as their appropriateness, in relation 
to  existing  aid  programmes.56  The  Act  on  the  general  conditions  for  business  aid 
requires  that  before  a  business  aid  scheme  is  approved  or  fundamentally  amended, 
the  official  preparing  the  matter  must  obtain  a  statement  concerning  it  from  the 
Business  Support  Advisory  Committee.  Action  models  are  applied  by  the  various 
administrative  sectors.  For  example,  the  Government  Institute  for  Economic 
Research  (VATT)  evaluates  the  impact  of  aid  which  is  granted  in  the  form  of 
increased  depreciation  on  investments  that  are  made  in  development  areas.  This 
research data is exploited when the applicability of state aid as an instrument is under 
consideration. It is also useful when deciding on the need for the continuation of aid. 

In the Slovak Republic, an assessment takes place at the stage of the preparation and 
evaluation  of  applications  for  state  aid.  Internal  and  external  evaluators  assess 
projects  independently  in  accordance  with  the  project  selection  criteria,  and  then 
present  a  joint  expert  opinion  to  the  evaluation  committee  in  accordance  with  the 
evaluation  criteria.  For  individual  investment  incentives,  the  Implementing  Agency 

The  Business  Support  Advisory  Committee  operates  in  connection  with  the  Ministry  of  Trade  and 
Industry and includes representation by all the key aid awarding Ministries. 

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– 

– 

– 

draws up an expert opinion on the application, and the state aid grantor then assesses 
the application in a process which includes an examination of the company’s market 
share before and after the investment, the investment locality, the unemployment rate 
in the given locality, the economic independence of the investor, and the benefit for 
the region. 

In  Poland,  when  designing  measures,  each  authority  diagnoses  the  problems 
occurring on the market individually, and in seeking appropriate remedial measures, 
applies  a  variety  of  instruments  of  state  intervention,  including  aid.  The  relevant 
authorities assess new aid, in particular, as regards its purpose and anticipated effect, 
at  the  stage  of  inter-departmental  negotiations.  For  example,  in  relation  to  tax 
instruments,  the  changes  made  in  recent  years  have  been  aimed,  amongst  other 
things,  at  changing  the  manner  in  which  companies  have  received  support.  In  the 
case  of  corporation  tax,  there  has  been  a  retreat  from  various  kinds  of  concessions 
arising from things such as object-based VAT exemption for reducing taxation. 

In  Spain,  the  preparation  of  any  state  aid  scheme  is  carried  out  by  the  competent 
management  centre.  The  Board  for  Economic  Affairs  (CDGAE)  examines  and 
discusses the proposals of the ministerial departments which affect the economy or 
major  economic  sectors  (in  particular,  government  measures  amounting  to  over  €6 
million). 

At the Ministry of the Interior and Kingdom Relations in the Netherlands, a state aid 
coordination  unit  for  decentralised  authorities  has  been  set  up  that,  in  addition  to 
coordinating and providing advice on notifications by those authorities, also does a 
great  deal  to  keep  them  informed  by,  inter  alia,  drafting  guides  on  certain  aspects, 
and  here  the  development  of  projects  without  aid  being  provided  is  an  important 
starting point. 

4. 

PART FOUR: LEGISLATIVE AND POLICY DEVELOPMENTS 

4.1. 

A modernized State aid policy 

Commission  outlines  comprehensive  five  year  reform  of  state  aid  policy  to  promote 
growth, jobs and cohesion 

In  June  2005,  the  Commission  launched  a  State  Aid  Action  Plan57  outlining  the  guiding 
principles  for  a  comprehensive  reform  of  state  aid  rules  and  procedures  over  the  next  five 
years.  In  particular,  the  Commission  intends  to  use  the  EC  Treaty’s  state  aid  rules  to 
encourage Member States to contribute to the Lisbon Strategy by focussing aid on improving 
the  competitiveness  of  EU  industry  and  creating  sustainable  jobs  (more  aid  for  R  &  D, 
innovation  and  risk  capital  for  small  firms),  on  ensuring  social  and  regional  cohesion  and 
improving  public  services.  The  Commission  also  aims  to  rationalise  and  streamline 
procedures,  so  that  the  rules  are  clearer  and  less  aid  has  to  be  notified,  and  to  accelerate 
decision-making. 

57 

http://europa.eu.int/comm/competition/state_aid/others/action_plan/ 

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Taking  account  of  the  comments  submitted  by  interested  parties  during  the  consultation 
process  that  ended  in  September,  the  Commission  will  shortly  set  out  detailed  reform 
proposals. 

The State Aid Action Plan is based on the following elements: 

– 

– 

– 

– 

less  distortive  and  better  targeted  state  aid,  in  line  with  the  European  Council’s 
repeated declarations, so that public money is used effectively to the benefit of EU 
citizens  in  terms  of  improving  economic  efficiency,  generating  more  growth  and 
sustainable  jobs,  social  and  regional  cohesion,  improving  services  of  general 
economic interest, sustainable development and cultural diversity. 

a  more  refined  economic  approach,  so  that  less  distortive  aid,  particularly  where 
money is less easily available from financial markets, can be approved more easily 
and quickly and so that the Commission concentrates its resources on the cases liable 
to create more serious distortions of competition and trade. 

more streamlined and efficient procedures, better enforcement, higher predictability 
and enhanced transparency. For example, Member States currently have to notify the 
Commission most of the state subsidies they want to give. The Commission proposes 
to  exempt  more  measures  from  this  notification  obligation  and  to  simplify 
procedures.  

the 
a  shared  responsibility  between 
Commission cannot improve state aid rules and practice without the effective support 
of  Member  States  and  their  full  commitment  to  comply  with  their  obligations  to 
notify any envisaged aid and to enforce the rules properly. 

the  Commission  and  Member  States: 

4.1.1.  Review of the regional aid guidelines 

Beginning in 2003, the Commission decided to review its approach to the control of national 
regional  state  aid  for  the  period  2007-2013,  in  close  cooperation  with  Member  States  and 
other  stakeholders.  The  review  was  intended  to  take  account  of  enlargement,  progressive 
deepening of the internal market, European competitiveness and demands for the reduction in 
overall State aid levels. 

A  Commission  staff  working  document  presenting  the  draft  regional  aid  Guidelines58  was 
transmitted to Member States in July 2005 and discussed with State aid experts from Member 
States in September 2005. The Commission aims to adopt a final version of the guidelines by 
the  end  of  2005,  in  order  to  leave  ample  time  for  Member  States  and  the  Commission  to 
ensure a smooth transition by the end of 2006. 

The three key features and principles of the new Guidelines are: the need to re-focus regional 
aid  on  the  most  deprived  regions  of  the  enlarged  Union;  the  need  to  improve  the  overall 
competitiveness of the Union, Member States and regions; and the need to ensure a smooth 
transition of the present system of regional state aid control to the new approach. 

58 

Available on DG Competition website: http://europa.eu.int/comm/competition/state_aid/regional/ 

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45 

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4.1.2.  Communication on State aid to export-credit insurance 

The  Communication  on  the  application  of  the  State  aid  rules  to  short-term  export-credit 
insurance (“STEC”) 59 is due to expire on 31 December 2005. Following the completion of a 
study on the situation of the private reinsurance market in the field of export credit insurance, 
and after consultation of Member States as well as of other interested parties, the Commission 
launched a new draft Communication to Member States on 17 October 2005. 

Further to a multilateral meeting with Member States and consultations with other interested 
parties  on  the  draft,  the  Commission  is  considering  to  leave  unchanged  the  definition  of 
marketable  risks  contained  in  the  2001  amendment.  However,  due  to  the  fact  that  in  most 
Member States there is unavailable or insufficient cover of export-credit insurance offered by 
private insurers to micro and small companies with a limited export turnover, the Commission 
services have proposed to consider their export-related risks, if and to the extent the private 
market in the Member States does not currently exist, as temporarily non-marketable, also in 
consideration of the need for the private market to adapt to the increased market size created 
by the EU enlargement. The Commission intends to publish the final Communication by the 
end of 2005. It has also decided to extend the validity of the 1997 Communication until 31 
December 2010. 

4.1.3.  Review of the R&D Framework 

The  existing  Community  Framework  for  State  Aid  for  Research  and  Development60  will 
expire  on  31  December  2005.61  In  the  State  Aid  Action  Plan,  the  Commission  decided  “to 
consider if the scope of the Framework for Research and Development should be extended to 
cover types of aid in favour of certain innovative activities, not already covered by existing 
guidelines or regulations thereby creating a Framework for R&D and Innovation”.62  

Following the Commission’s adoption of a consultative document on innovation (see below), 
it will not be possible to have a common framework for R&D and Innovation in place before 
the end of 2005. Accordingly, the Commission has now decided to apply the existing R&D-
framework until the entry into force of such a document, 31 December 2006 at the latest.  

4.1.4.  Communication on State aid to innovation 

In September 2005, the Commission launched a public consultation on measures to improve 
state  aid  for  innovation.  The  suggested  improvements,  set  out  for  consultation  in  a  draft 
Communication  on  State  Aid  for  Innovation63,  include  rules  for  aid  that  funds  innovation, 
criteria to help public authorities to target aid more effectively, clarifying the rules to increase 
legal certainty and simplification of the regulatory framework.  

The  Commission  makes  clear  in  the  consultation  that  state  aid  is  not  the  response  to  all 
Europe’s competitiveness or innovation problems. While the Commission recognises that, in 

59 
60 

61 
62 
63 

OJ C 281 of 17.9.1997, p. 4, as amended in OJ C 217, 2.8.2001, p. 2, and OJ C 307, 11.12.2004, p. 12. 
OJ C 45 of 17.2.1996, p. 5, as amended by the Commission communication amending the Community 
Framework for State Aid for Research and Development, OJ C 48 of 13.2.1998, p.2. 
OJ C 111, 8.5.2002, p.3. 
Paragraph 28 of the State Aid Action Plan. 
The  Communication,  press  release  and  memo  with  frequently  asked  questions  can  be  found  under: 
http://europa.eu.int/comm/competition/state_aid/others/action_plan/ 

EN 

46 

   EN 

 
                                                 
an  effort  to  create  growth  and  jobs,  state  aid  policy  can  be  used  pro-actively  to  support 
innovation,  by  tackling  the  market  failures  that  prevent  markets  from  naturally  delivering 
innovation, it also stresses that for business to embark on a more innovative path it requires, 
first  and  foremost,  effective  competition.  Competition  creates  natural  incentives  for 
companies to come up with new ideas and new products; it makes them adapt to change; and 
sanctions those that stay put or lag behind. Ensuring competition as a driver of innovation is 
therefore of paramount importance.  

In line with the refined economic approach laid down in the State Aid Action Plan, the draft 
Communication  sets  out  a  clear  methodology  for  the  elaboration  of  state  aid  measures  for 
innovation activities. The principles are that state aid can only be authorised when 1) the aid 
instrument  targets  a  well-defined  market  failure;  2)  state  aid  is  the  most  appropriate  policy 
instrument  (which  is  not  always  the  case  sometimes,  structural  policies  or  regulatory  action 
may  be  more  appropriate);  3)  the  aid  has  an  incentive  effect  on  innovation  and  is 
proportionate to the defined objective and 4) distortions of competition are limited. 

The proposals for innovation aid cover six broad areas: innovative start-ups; risk capital; the 
integration of innovation into existing rules on state aid for research and development (R&D); 
innovation  intermediaries;  training  and  mobility  between  university  research  personnel  and 
SMEs; and poles of excellence for projects of common European interest. 

The Communication  invited  comments on a series of concrete measures  for which state aid 
could be authorised by the Commission through ex-ante rules and criteria. On the basis of the 
consultation, which the Commission is currently assessing, new provisions will be integrated 
into the existing state aid rules. These provisions will not only give Member States who apply 
them  more  speedy  approval  of  state  aid  for  innovation  but  also  help  Member  States  target 
public  money  more  effectively.  A  first  exchange  of  views  with  Member  States  should  take 
place at the end of 2005/beginning of 2006, with a view to adoption of the future R&D and 
Innovation Framework in the first half of 2006.  

4.1.5.  Revision of the Communication on State aid to risk capital 

As  mentioned  above,  the  draft  Communication  on  innovation  is  proposing  additional 
flexibility for state aid to risk capital, notably for the very early project stages (where private 
investors are extremely reluctant to invest), and for the development phase (where additional 
funding is often missing to help start-ups grow).  

The Commission intends to propose a new draft Communication on State aid to risk capital in 
early  2006,  to  replace  the  current  version64  which  expires  in  August  2006.  In  preparing  the 
review,  the  Commission  will  take  account  of  the  replies  to  the  questionnaire  sent  out  for 
public consultation in January 2005. 

4.1.6. 

Services of General Economic Interest (SGEI) 

A package of measures providing greater legal certainty to the financing of services of general 
economic interest and public service compensation was adopted by the Commission in July 
2005. 

64 

Communication on State aid to risk capital OJ C 235 of 21.8.2001. See: 
http://europa.eu.int/comm/competition/state_aid/legislation/aid3.html#risk 

EN 

47 

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The measures ensure that companies can receive  public support  to cover net costs incurred, 
including a reasonable profit, in carrying out public service tasks as defined and entrusted to 
them by public authorities, whilst ensuring that there is no over-compensation liable to distort 
competition.  Member  States  are  able  to  grant  compensation  to  small-scale  public  services, 
hospitals  and  social  housing  without  notifying  the  Commission.  The  package  consists  of  a 
Commission Decision based on Article 86 of the Treaty, a Framework and a modification of 
the Commission Directive on financial transparency.  

The Commission Decision (based on Article 86(3) of the EC Treaty) specifies the conditions 
under  which  compensation  to  companies  for  the  provision  of  public  services  is  compatible 
with state aid rules (a clearly defined public service mandate and no over-compensation) and 
does  not  have  to  be  notified  to  the  Commission  in  advance.The  Decision  is  applicable  to 
compensation  of  less  than  €30  million  per  year  provided  its  beneficiaries  have  an  annual 
turnover of less than €100 million. Compensation granted to hospitals and social housing for 
services  of  general  economic  interest  also  benefits  from  the  Decision  irrespective  of  the 
amounts involved, as does compensation for air and sea transport to islands as well as airports 
and ports below specific thresholds defined in passenger volumes. 

The Commission Framework specifies the conditions under which compensation not covered 
by the Decision is compatible with state aid rules. Such compensation will have to be notified 
to  the  Commission  due  to  the  higher  risk  of  distortion  of  competition.  Compensation  that 
exceeds  the  costs  of  the  public  service,  or  is  used  by  companies  on  other  markets  open  to 
competition, is not justified, and is incompatible. 

Finally, the package modifies the existing Transparency Directive to ensure clear separation 
of  the  operators’  public  service  costs  and  costs  for  commercial  services,  to  enable  clear 
assessment of the costs of public services. 

See also article in the autumn 2005 edition of the DG Competition Newsletter.65  

4.1.7.  Revision of Environmental aid Guidelines 

As  mentioned  in  section  2.1.6,  the  Commission  has,  as  part  of  the  revision  process  for  the 
Guidelines  on  state  aid  for  environmental  protection,  which  will  expire  at  the  end  of  2007, 
invited Member States and other interested parties to share their experience with the current 
guidelines.  In  this  context,  in  August  2005,  the  Commission  published  a  questionnaire66 
addressing  some  of  the  issues  currently  under  consideration.  The  Commission  is  currently 
examining the replies to the questionnaire with a view to preparing a draft set of guidelines to 
be circulated to Member States during the course of 2006. 

4.2. 

Recovery of unlawful aid 

Article 14 (1) of Council Regulation 659/1999 states that “where negative decisions are taken 
in cases of unlawful aid, the Commission shall decide that the Member State concerned shall 
take all necessary measures to recover the aid from the beneficiary.” 

65 

66 

EC  Competition  Policy  Newsletter  -  2005  Number  3  Autumn  (forthcoming):  “Public  Service 
Compensation  in  Practice  –  Commission  Package  on  State  Aid  for  Services  of  General  Economic 
Interest” - http://europa.eu.int/comm/competition/publications/cpn/ 
http://europa.eu.int/comm/competition/state_aid/others/00910_questionnaire_env_en.pdf 

EN 

48 

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As of 30 June 2005, there were 84 pending recovery decisions, compared to 94 at the end of 
2004.67  During  the  first  six  months  of  2005,  14  cases  were  closed  while  a  further  four  new 
recovery decisions were taken (Table 14). The geographical distribution of pending recovery 
cases remains relatively stable: Germany accounts for the largest number of pending recovery 
cases  (42%)  followed  by  Spain  (24%),  Italy  (14%)  and  France  (8%).  There  are  no  pending 
cases in sixteen of the EU-25 Member States. 

Table 14: Pending recovery cases by Member State, first semester 2005 

New cases 
in first 
semester 
2005 
1 
0 
2 
0 
0 
1 
0 
0 
0 
4 

Cases 
closed 
 in first 
semester 
2005 
10 
0 
1 
3 
0 
0 
0 
0 
0 
14 

Situation 
31/12/2004

44 
20 
11 
10 
3 
2 
2 
1 
1 
94 

Situation 
30/06/2005

35 
20 
12 
7 
3 
3 
2 
1 
1 
84 

DE 
ES 
IT 
FR 
BE 
NL 
EL 
PT 
SW 
TOTAL 

Source: DG Competition. 

Table 15 provides data on the amounts of aid to be recovered under the 96 recovery decisions 
adopted since 200068. For 72 of these decisions, relatively accurate information exists on the 
amount of aid involved. This information shows that the total amount of aid to be recovered 
on the basis of decisions adopted between 1.1.2000 and 30.6.2005 is € 9.4 billion69. Half of 
this  amount  is  due  to  decisions  taken  in  2004  (Landesbanken,  France  Télécom,  Spanish 
shipyards). 

67 
68 

69 

Excluding any recovery cases in the agriculture, fisheries or transport sectors. 
On  30.6.2005,  there  were  still  a  further  16  recovery  decisions  pending  that  were  adopted  before 
1/1/2000. 
The spring 2005 Scoreboard reported a total of €9.7 billion. The reasons for the discrepancy are due to 
the annulment of the Credit Mutuel decision by the CFI and to the use of some estimated figures for 
which final data are now available. 

EN 

49 

   EN 

 
 
 
 
                                                 
Table 15: Trend in the number of recovery decisions and amounts to be recovered, 
2000-2005 

Nr.of decisions adopted 
Nr of decisions for which the 
aid amount is known 
Total aid to be recovered 
(million €) (1) 
Amounts recovered (in 
million €) 
   Of which:
   (a) Principal reimbursed/in 
blocked account

   (b) Aid lost in bankruptcy
   (c) Interest
Amount outstanding (2)
% still pending to be 
recovered

Date of Decision 

2000 
16 

2001 
21 

2002 
22 

2003 
10 

2004 
23 

First sem. 
 2005 
4 

Total 
96 

15 

12 

17 

8 

18 

2 

72 

362.1 

1828.5 

1089.8 

1015.9 

5104.2 

10.4 

9410.9 

108.2 

797.9 

1441.4 

1228.2 

4396.3 

0

7972.0

17.1

797.9

1038.0

892.5

3135.1

91.1

253.9

1030.6

1.2
402.2
50.6

0.7
335
122.7

1261.2
1969.1

10.4

5880.6

93.0
1998.4
3437.3

70.1% 56.4%

4.6% 12.1% 38.6% 100.0% 36.5%

(1)  Only  for  Decisions  for  which  the  aid  amount  is  known.  (2)  Amount  excluding  interest.  Source:  DG 
Competition. 

For 24 of the recovery decisions adopted since 2000, the Member State concerned has not yet 
submitted reliable information on the aid amount involved. The availability of information on 
amounts to be recovered is particularly limited in the case of aid schemes, especially tax or 
quasi-tax aid measures, and aid measures involving guarantees. The Commission continues its 
efforts to obtain information from the Member States on the aid amounts involved.  

Of  the  €  9.4  billion  of  aid  to  be  recovered  under  decisions  adopted  since  2000,  some  €  7.9 
billion  (a  principal  amount  of  €  5.9  billion  plus  almost  €  2  billion  interest)  had  been 
effectively recovered by the end of June 2005. Excluding interest, this represents 63.5% of the 
total amount to be recovered. 

Recovery  of  incompatible  state  aid  is  a  lengthy  process:  16  of  the  recovery  decisions  still 
pending  at  the  end  of  June  2005  were  adopted  before  the  year  2000.  Of  the  96  decisions 
adopted between 2000 and June 2005, only 29 were closed by the end of June 2005 (Table 
16). 

EN 

50 

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Table 16: Trend in the closure of recovery cases 

Date of the decision
2000

2001

2002

2003

2004

Number of 
recovery 
decisions 
adopted
Number of 
recovery cases 
closed on 
30/06/05

Source: DG Competition. 

16

21

22

10

23

9

2

9

4

5

Total

First 
semester 
2005

4

0

96

29

As underlined in the State Aid Action Plan (SAAP), the effectiveness and credibility of state 
aid  control  presupposes  a  proper  enforcement  of  the  Commission’s  decisions.  The 
Commission  therefore  announced  in  the  SAAP  that  it  will  seek  to  achieve  a  more  effective 
and immediate execution of the recovery decisions, which will ensure equality of treatment of 
all beneficiaries. To this effect, the SAAP announces that the Commission will monitor more 
closely the execution of the recovery decisions by Member States. Where Member States do 
not  take  all  measures  available  to  implement  such  decisions,  the  Commission  will  more 
actively pursue non-compliance under Articles 88(2), 226 and 228 of the Treaty. 

See  also  article  “Enforcement  of  State  aid  recovery  decisions”  in  the  Competition  Policy 
Newsletter70. 

4.3. 

State aid to the agricultural sector 

In accordance with Annex IV, part 4, point 4 of the Accession Treaty the new Member States 
could  communicate  to  the  Commission  all  schemes  and  individual  aid  granted  before 
accession  and  still  applicable  after  accession  in  order  to  have  them  approved  by  the 
Commission as “existing” aid within the meaning of Article 88(1) of the EC Treaty. Until the 
end of third year from the date of accession the new Member States shall, where necessary, 
amend  these  measures  in  order  to  comply  with  the  guidelines  applied  by  the  Commission. 
After that date any aid found incompatible with those guidelines shall be considered as new 
aid. 

The  Accession  Treaty  obliges  the  Commission  to  publish  a  list  of  aids  it  has  approved  as 
existing  aid.  The  Commission  has  not  only  published  a  list  of  existing  aid  measures  in  the 
Official Journal71 but has also put the full text of all existing state aid measures notified by the 
ten new Member States on-line. A total of 451 measures have been made accessible. This is a 
big step towards creating more transparency in the field of state aid. Nothing similar has been 
done  for  previous enlargements. Since these  existing  state aid measures  are not subject to a 
full assessment by the Commission, it would otherwise be difficult for the public to know the 

70 

71 

Competition Policy Newsletter, Number 2, Summer 2005: 
http://europa.eu.int/comm/competition/publications/cpn/cpn2005_2.pdf 
OJ C 147, 17.6.2005, p. 2 

EN 

51 

   EN 

 
 
                                                 
substance  of  the  state  aid  measures  that  are  in  place  in  the  new  Member  States.  This 
transparency notably improves legal certainty for the farmers in the new Member States in the 
sense  that  they  (and  farmer  representatives)  can  now  easily  check  whether  state  aid  they 
receive is covered by an existing aid regime. 

The number of measures submitted per new Member State is: 

Czech Republic 
Lithuania 
Latvia 
Slovakia 
Estonia 
Malta 
Hungary 
Cyprus 
Poland 
Slovenia 

63 
30 
33 
32 
23 
19 
108 
70 
51 
22 

The Commission has published the full texts of these existing measures on the Internet at the 
following address: http://europa.eu.int/comm/agriculture/stateaid/newms/index_en.htm 

By  the  end  of  November  2005,  Member  States  have  communicated  to  the  Commission 
services the summaries of around 80 different measures under the procedure laid down by art. 
19  of  Regulation  N°  1/2004  granting  exemption  for  certain  types  of  state  aid  accorded  to 
small  and  medium-sized  agricultural  enterprises.  The  Commission  has  published  these 
summaries on the Internet at the following address: 

http://europa.eu.int/comm/agriculture/stateaid/exemption/index_en.htm. 

4.4. 

State aid to the transport sector 

One  of  the  main  objectives  of  the  common  transport  policy  is  the  promotion  of 
environmentally friendly modes of transport in order to achieve a reduction of road transport. 
In  this  sense,  the  revitalisation  of  the  railway  sector  is  considered  as  a  key  element  in  the 
Community’s  common  transport  policy.  Rail  transport  has  to  be  made,  once  again, 
competitive  enough  to  remain  one  of  the  leading  players  in  the  transport  system  in  an 
enlarged  Europe.  By  2007,  the  entire  European  freight  network,  both  internationally  as 
nationally, will have been opened up completely to competition. The arrival of new railway 
companies should make the sector more competitive and encourage the national companies to 
restructure.  In  this  context,  specific  guidelines  for  the  railway  sector  will  be  developed  in 
2006. The main objective of these guidelines is to establish a common approach with regard 
to public contributions to the railway sector. It is necessary from both a legal and a political 
point of view that national authorities, companies and individuals are made aware, in a clear 
and transparent way, of the rules applicable to the railway sector in this new more competitive 
environment. This initiative will significantly increase transparency and legal certainty.  

Further as regards legislation, the Commission published in June 2005 its draft proposal of 3 
March  2004  amending  the  de  minimis  Regulation  by  including  in  its  scope  the  transport 
sector. Observations from all interested parties were transmitted as of July 2005.  

EN 

52 

   EN 

 
In  July  2005  the  Commission  also  adopted  a  revised  proposal  for  a  Regulation  on  public 
passenger transport services by rail and by road, designed to modernise Regulation 1191/69, 
which  is  still  in  force  today.  This  proposal  gives  national,  regional  and  local  authorities  the 
possiblity  of  defining  the  public  service  missions  of  inland  transport  (bus,  train,  tram, 
underground railway) and to give financing or exclusive rights to the operators responsible for 
such services, if this is necessary for the operation of  these public services.  The  Regulation 
also  sets  a  framework  for  the  choice  by  the  local  authorities  of  the  undertakings  to  provide 
these  public  transport  services.  It  is  stipulated  that  even  though  from  a  legal  angle  the 
financing granted in accordance with this Regulation as compensation for the public service 
constitutes State aid, it need not be notified to the Commission and is considered compatible 
with the internal market rules. 

Concerning the air sector, the Commission adopted on 6 September 2005 a Communication 
on Community guidelines on financing of airports and start-up aid to airlines departing from 
regional  airports72.  Following  a  wide-ranging  public  consultation,  the  Commission  has 
adopted new rules which will encourage the development of regional airports. These rules lay 
down the conditions under which start-up aid can be granted to airlines to operate new routes 
from  regional  airports.  New  regional  air  services  will  encourage  mobility  in  Europe  and 
regional  development.  The  clear  rules  adopted  guarantee  equal  treatment  for  public  and 
private  airports  and  ensure  that  airlines  receiving  aid  are  not  unduly  favoured.  These 
guidelines also give airports and Member States guidance on the public financing of airports 
establishing  a  firm  legal  framework  for  agreements  between  airports  and  airlines.  The  new 
guidelines  will  increase  transparency  and  prevent  any  discrimination  in  the  agreements 
concluded by regional airports and airlines on start-up aid. 

4.5. 

Enlargement 

On 25 April 2005 the Accession Treaty with both Romania and Bulgaria was signed. A series 
of  safeguard  clauses  were  included  in  the  Accession  Treaty,  in  the  event  the  acceding 
countries  fail  to  implement  commitments  undertaken  in  the  context  of  the  accession 
negotiations, as well as a provision for the possible postponement of the date of accession by 
one year in the event of either state being manifestly unprepared to meet the requirements of 
membership. In the case of Romania, the Treaty specifies that the Council may, on the basis 
of  a  Commission  recommendation  and  after  a  detailed  assessment  decide  on  such  a 
postponement, if it finds shortcomings in Romania’s fulfilment of specific conditions in the 
competition area.  

According to the Commission's comprehensive monitoring report on the state of preparedness 
for EU membership published in October 2005, both Bulgaria and Romania have continued to 
make progress in adopting and implementing EU legislation and have reached a considerable 
degree of alignment. Romania was called to make increased efforts in the area of competition 
policy  as  regards  in  particular  the  enforcement  of  state  aid  rules.  The  Commission  will 
continue to monitor progress intensively up to accession and intends to present a monitoring 
report  to  the  Council  and  Parliament  in  April/May  2006.  At  that  moment,  the  Commission 
may  recommend  that  the  Council  postpone  the  accession  of  Bulgaria  or  Romania  until  1 
January 2008 if there is a serious risk of any of those states being manifestly unprepared to 
meet the requirements of membership by January 2007 in a number of important areas.  

72 

http://europa.eu.int/comm/dgs/energy_transport/state_aid/doc/2005_09_06_aviation_guidelines_en.pdf 

EN 

53 

   EN 

 
                                                 
No existing aid measures have been attached to the Accession Treaty of Romania, nor will the 
interim  procedure  be  applied  until  the  Commission  concludes  that  Romania’s  state  aid 
enforcement record has reached a satisfactory level. In the case of Bulgaria, three measures 
have been annexed to the Accession Treaty that shall be thus  regarded as existing aid upon 
accession. In October 2005, Bulgaria submitted its first request to the Commission under the 
interim procedure pursuant to Annex V § 2.1(c) of the Accession Treaty. 

EU  Member  States  decided  in  Luxemburg  on  3  October  2005  to  launch  accession 
negotiations with Croatia and Turkey. The advancement of the negotiations will be guided by 
the  candidate  countries’  progress  in  preparing  for  accession.  Progress  will  be  measured  in 
particular  against  the  Copenhagen  criteria,  which  includes  among  its  requirements  for 
membership  “the  existence  of  a  functioning  market  economy  and  the  capacity  to  cope  with 
competitive  pressure  and  market  forces  within  the  Union”.  For  each  chapter  of  the 
negotiations,  the  Council  must  lay  down  benchmarks  for  the  provisional  closure  of 
negotiations, including a satisfactory track record on implementation of the acquis. Existing 
legal obligations relating to alignment with the acquis must be fulfilled before negotiations on 
the chapters concerned are closed. Long transition periods may be necessary. Issues relating 
to competition and state aid will be dealt in a separate chapter during the negotiations.  

5. 

ONLINE STATE AID SCOREBOARD, REGISTER AND OTHER REPORTS ON STATE AID 

The online Scoreboard contains electronic versions of this and previous Scoreboards as well 
tables: 
as 
http://europa.eu.int/comm/competition/state_aid/scoreboard/ 

indicators 

statistical 

a  wide 

array 

and 

key 

set 

of 

of 

a 

Any  queries  or  requests  for  data  should  be  sent 
Stateaid-Scoreboard@cec.eu.int 

to 

the  scoreboard  mailbox  at 

State aid Register – a second transparency tool 

The  Commission’s  State  aid  Register  has  been  online  since  2001.  The  Register  provides 
detailed information on all State aid cases which have been the object of a final Commission 
decision  since  1st  January  2000  as  well  as  block  exemption  cases  published  in  the  Official 
Journal.  It  is  updated  daily  and  thus  ensures  that  the  public  has  timely  access  to  the  most 
recent  State  aid  decisions.  It  is  available  on  the  homepage  of  the  Competition  Directorate 
General’s Internet site: 

http://europa.eu.int/comm/competition/state_aid/register/ 

Following an extensive review, a major revamp of the Register is foreseen and should be fully 
operational in early 2006. 

Annual Competition Report and Competition Policy Newsletter 

The Commission publishes an Annual Report on Competition Policy which summarises the 
most important legal developments and case-law of the year as well as statistical data on the 
Commission’s work during the relevant year. 
http://europa.eu.int/comm/competition/annual_reports/ 
A  Competition  Policy  Newsletter  is  also  published  three  times  a  year  by  the  Competition 
Directorate-General  of  the  European  Commission.  It  aims  at  describing  and  discussing  in 

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more detail legislative developments as well as interesting case-law and covers generally the 
preceding four months. 
http://europa.eu.int/comm/competition/publications/cpn/ 

6. 

METHODOLOGICAL NOTES 

The Scoreboard covers State aid as defined under Article 87(1) EC Treaty that is granted by 
the EU-25 Member States and has been examined by the Commission. Accordingly, general 
measures  and  public  subsidies  that  have  no  affect  on  trade  and  do  not  distort  or  threaten  to 
distort  competition  are  not  dealt  with  in  the  Scoreboard  as  they  are  not  subject  to  the 
Commission’s  investigative  powers.  For  example,  a  general  tax  break  for  expenditure  on 
research  and  development  is  not  considered  as  State  aid  although  it  may  well  appear  in 
Member  States  national  budgets  as  public  support  for  research  and  development. 
Furthermore, Community funds and instruments are also excluded. See also box on “What is 
a State aid” on page 11 of the spring 2005 update of the Scoreboard. 

All State aid data refer to the implementation of Commission decisions and not cases that are 
still  under  examination.  There  may  be  discrepancies  with  figures  published  in  previous 
Scoreboards  for  a  number  of  reasons:  first,  provisional  or  estimated  figures  may  now  be 
replaced by final data; second, when the Commission takes a decision on a non-notified aid 
measure, the aid in question is attributed to the year(s) in which it was awarded. In cases that 
result in expenditure over a number of years, the total amount is attributed to each of the years 
in  which  expenditure  took  place.  All  data  are  provided  in  million  (or  billion  where 
appropriate) euro at constant 1995 prices but have been re-referenced on the year 2004.  

This autumn 2005 edition of the Scoreboard focuses largely on the year 2004. This is the first 
time that the Commission, thanks to the efforts of the Member States in responding to the new 
reporting requirements set out in Commission Regulation 794/2004, has been able to publish 
data for the preceding year. Another improvement concerns the inclusion of recent decisions, 
taken  between  January  and  August  2005,  during  which  the  Commission  reached  a  final 
decision following a formal investigation procedure. 

As  in  previous  years,  State  aid  data  collected  for  the  Scoreboard  are  grouped  according  to 
primary  objectives  which  may  be  either  horizontal  or  sector-specific.  Information  on  the 
objective of the aid, or, the sector to which the aid is directed, refers to the time the aid was 
approved  and  not  to  the  final  recipients  of  the  aid.  For  example,  the  primary  objective  of  a 
scheme  which,  at  the  time  the  aid  was  approved,  was  exclusively  earmarked  for  SMEs  is 
classified  as  aid  for  ‘SMEs’.  In  contrast,  aid  granted  under,  say,  a  regional  development 
scheme may ultimately be awarded to SMEs, but is not regarded as such if, at the time the aid 
was approved, the scheme was open to all enterprises.  

The following symbols have been used in the Scoreboard: 

n.a. 

not available 

- 

0 

real zero 

less than half the unit used 

Further information on methodological issues may be found on the online Scoreboard: 

http://europa.eu.int/comm/competition/state_aid/scoreboard/conceptual_remarks.html 

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