2007/508/EC: Commission Decision of 6 December 2006 on the State and C 22/2006 (ex N 615/05) which Italy is planning to implement for tax rebates on oil emulsions with water (notified under document number C(2006) 5805)   (Text with EEA relevance)
Date: 2006-12-06
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, excise duty, fuel, pollution control measures, tax relief, tax system, water

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 6 December 2006

on the State and C 22/2006 (ex N 615/05) which Italy is planning to implement for tax rebates on
oil emulsions with water

(notified under document number C(2006) 5805)

(Only the Italian version is authentic)

(Text with EEA relevance)

(2007/508/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

request dated 6 March 2006,
the Italian authorities
provided additional information by letter dated 6 April
2006.

Having regard to the Treaty
establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to those provision(s) (1) and having regard to their
comments,

Whereas:

I. PROCEDURE

(1)

By letter dated 5 March 2005, registered as received on
13 December 2005 and supplemented by letter dated 9
January 2006, registered as received on 12 January 2006,
the Italian authorities notified the Commission of the
abovementioned measure in accordance with Article
the EC Treaty. Following a Commission
88(3) of

(2)

(3)

(4)

By letter dated 7 June 2006, the Commission informed
Italy that it had decided to initiate the procedure laid
down in Article 88(2) of the EC Treaty in respect of
the measure.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (2).
The Commission called on interested parties to submit
their comments.

The Commission received comments from interested
parties. It forwarded them to Italy, which was given the
opportunity to react;
its comments were received by
letters dated 13 September 2006 and 29 September
2006.

II. DESCRIPTION OF THE MEASURE

(5)

Emulsified fuels are a blend of approximately 15 % water
and 85 % fuel oil or gas oil. They have a lower impact on

(1) OJ C 157, 6.7.2006, p. 8.

(2) See footnote 1.

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environment

than conventional

fuels. Recent
the
studies (3) show that adding water to fuels leads to
higher quality of combustion in terms of emissions.
Vaporisation of water during the combustion process
increases fuel dispersion resulting in increased contact
surface between fuel
the
and
emissions of PM particulates by 59 %. Water vaporisation
also reduces
thereby
reducing the formation of nitrogen oxides (NOx) by
6 %. The efficient combustion process reduces carbon
monoxide (CO) by 32 % (4).

combustion temperature,

air. This

reduces

the

However, production and storage of emulsions is costly
and therefore the price for the final blend is higher than
the market price of fossil fuels. Emulsions have an energy
content 10 % lower
fuel. Using
emulsions causes additional operating costs, e.g. costs
two
of periodical
components from separation, cleaning of tanks and the
need for product recirculation systems.

than conventional

that prevents

reprocessing

the

Emulsions

Conventional fuels

Gas oil for transport

79 359

24,5 million

Gas oil for heating

12 574

2,9 million

Fuel oil for heating

12 498

151 000

(9) Within the Community emulsions are mainly used in
Italy. However,
this technology in public
transport is at an experimental stage in some Member
States, e.g. France, the United Kingdom and the Czech
Republic.

the use of

(10)

The measure aims at promoting the use of emulsion fuels
by ensuring that they are available at a reasonable price.
The aid offsets the cost difference between conventional
fuels and emulsions.
it tackles a market
In this way,
failure, i.e. that the environmental benefits of emulsions
are not reflected in the market price of conventional
fuels.

Emulsions have been adopted in Italy for public
transport, waste
collection and transport of goods
(ca 9 000 vehicles) by more than 80 municipalities (5).
Emulsions are also used for heating purposes in private
housing (ca 100 houses) and public buildings
like
(ca 300 heated
schools and universities
museums,
buildings).

(11)

The measure is to apply for one year: from 1 January
2006 to 31 December 2006. The planned budget is
EUR 8,9 million. The beneficiaries of the scheme will
be between 11 and 50 emulsions producers.

transport and for heating.

The emulsions that are on the Italian market are mainly
based on low sulphur gas oil/water blends and they are
used for
In 2005 the
emulsions used for transport were all gas oil based,
whereas the emulsions used for heating were based
either on gas oil or on low sulphur heavy fuel. Other
heavy fuel oil emulsions listed in the notification – high
and low sulphur content
for industrial use and high
sulphur content for heating – were not on the market
in 2005. In comparison to the consumption of conven-
tional fuels, the consumption of emulsions in Italy is still
rather marginal. The volumes consumed in tonnes of
emulsions and of conventional fuels in 2005 were as
follows:

(3) Studies carried out by Laboratori ENI Tecnologie and the European
Commission’s Joint Research Centre in Ispra (for example, research
undertaken within Action 2113 – Emissions Characterisation and
Inventories).

(4) Actual reductions depend on the waterdiesel ratio.
(5) Including large cities like Milan, Rome, Naples, Turin and Genoa.

(12) Article 18(1) of the Council Directive 2003/96/EC of 27
October 2003 restructuring the Community framework
for the taxation of energy products and electrici (‘Energy
Tax Directive’ (6), and in particular the fourth indent of
point 8 in Annex II thereof, allowed Italy to apply a
reduced excise duty to emulsions of water blended with
gas oil or fuel oil until the end of 2005. Italy notified the
measure for the period from 1 January 2006 to 31
December 2006, and for the year 2006 Italy intends to
apply the scheme using the general provisions of the
Energy Tax Directive.

(13)

In comparison to the normal rate for fossil fuels that
applies in Italy, the advantages of the measure in terms
of the reduced rates are as follows (all reductions are
granted per litre of the gas oil emulsion concerned and
per kilogram of the heavy fuel oil concerned):

(6) OJ L 283, 31.10.2003, p. 51.

(6)

(7)

(8)

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Emulsions

Normal rate

Reduction

Reduced rate

Min. tax level of ETD (*)

water/gas oil, used as motor
transport

fuel

in

EUR 403

EUR 146,3

EUR 256,7

EUR 302

water/gas oil, used for heating

EUR 403,2

EUR 158

EUR 245,2

EUR 21

water/low sulphur heavy fuel oil, used for
heating

(*) ETD – Energy Tax Directive

EUR 64,2

EUR 34,7

EUR 29,5

EUR 15

reduced rates

The notification also mentions
for
emulsions that are not on the market like water/heavy
fuel oil emulsions for industrial use with high and low
sulphur content (EUR 41,6 and EUR 20,8 respectively)
and high sulphur content heavy fuel oil emulsion for
heating use (EUR 99,3).

(16)

Furthermore,
the Italian authorities refused to give a
commitment to suspend the granting of new aid under
the current scheme to firms which have not reimbursed
the incompatible aid in compliance with the previous
recovery decision. Therefore, the Commission found it
impossible to take into account the cumulated distortion
arising from the old aid and the new aid.

(14)

In its letter of 6 March 2006, the Commission requested
the Italian authorities to suspend the granting of the aid
under the current scheme until
the recovery of any
incompatible aid by the firms that are the subject of a
negative State aid decision, and in particular Commission
Decision 2000/128/EC of 11 May 1999 concerning aid
granted by Italy to promote employment
(OJ L 42,
15.2.2000, p. 1), Commission Decision 2003/193/CE
concerning tax exemption and privileged loans
in
in Italy (7), Commission
favour of public utilities
Decision 2004/800/EC of 30 March 2004 on the State
aid scheme put into effect by Italy providing for urgent
to assist employment (8), and Commission
measures
Decision 2005/315/EC of 20 October 2004 on the aid
scheme implemented by Italy for
firms investing in
municipalities seriously affected by natural disasters in
2002 (9).

IV. COMMENTS FROM INTERESTED PARTIES

(17)

parties

following

interested

their
The
the
comments on the initiation of
Petrolifera on 3 August 2006 and the
Unione
European Emulsion Fuel Manufacturers’ Association
(EEFMA) on 7 August 2006.

submitted
the procedure:

(18)

The EEFMA stressed that emulsion fuels are the only fuels
that reduce simultaneously the nitrogen oxide, particulate
and carbon dioxide emissions of diesel engines without
the need for any mechanical modifications.

(15)

III. GROUNDS FOR INITIATING THE ARTICLE 88(2)
PROCEDURE

In the case of gas oil emulsions used as motor fuel Italy
applies the minimum tax rate of EUR 302 only to the
fossil fuel part of the blend. Therefore the final tax for
the emulsion is EUR 256,7. The Commission doubted
the tax exemption for emulsions used as motor
that
taxation applicable
fuel complied with the levels of
under the Energy Tax Directive and that
it did not
affect trading conditions and distort competition to an
extent contrary to the common interest.

(7) OJ L 77, 24.3.2003, p. 21.
(8) OJ L 352, 27.11.2004, p. 10.
(9) OJ L 100, 20.4.2005, p. 46.

(19)

The EEFMA elaborated in detail on the issue that adding
water to gas oil changes the fuel’s characteristics. The
presence of water gives the emulsion a milky appearance
is clear and trans-
at room temperature, while gas oil
parent. The distinctive characteristic of the emulsion is
its stability by centrifugation. The emulsion’s density
interval of 842-870 kg/m3 is considerably higher than
that of gas oil which is 820 to 845 kg/m3. The same is
true for the viscosity interval at 40 °C. The average
calorific power of gas oil is 10 500 kcal/kg, while that
of emulsions is 9 300 kcal/kg. This difference explains
why the average consumption of emulsion per km run is
higher than that of gasoil.

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(20)

The Petroleum Union pointed out that the beneficiaries
of the State aid in question are not beneficiaries of aid
that has been judged illicit pursuant
to the decisions
mentioned in paragraph 14.

(25)

VI. ASSESSMENT OF THE MEASURE

Italy has notified the measure to the Commission and its
entry into force is subject to the Commission’s approval,
so Italy has complied with its obligations under Article
88(3) of the EC Treaty. Since Italy notified the aid for the
period from 1 January 2006 to 31 December 2006, this
assessment concerns only this period and is without
prejudice to the measure Italy applied in the past.

V. COMMENTS FROM ITALY

(21)

Italy submitted its comments on 11 July 2006 and
commented on the third parties’ observations by letters
dated 13 September 2006 and 28 September 2006.

Existence of aid within the meaning of Article 87(1)
of the EC Treaty

(26) According to Article 87 of the EC Treaty, State aid is (a)
any aid granted by a Member State or through State
resources
by
distorts
favouring certain undertakings,
insofar as it affects
trade between Member States.

competition

(b) which

(d)

(c)

(22)

(23)

(24)

the

energy

specific

structure,

emulsions

producing

their physical

Italy described in detail
character of
emulsions. In particular Italy pointed out that, because
of
should be
considered as having two parts: one ‘active’, made up
of hydrocarbons (diesel or fuel oil) and as such capable
of
or
combustion; the other completely ‘passive’, made up of
water, which is present
for the purpose of reducing
polluting emissions by comparison with diesel or fuel
oil used in the pure state. The water present
in the
emulsions
energy during the heating
process and is transformed into steam. Such emulsions
are therefore products with specific characteristics that
are different from traditional petroleum products.

also absorbs

carburation

following

(27)

The aim of this measure is to compensate the emulsions
producers for part of their production costs; the measure
therefore
the
production of certain goods. Excise tax reduction is
granted from State resources because by reducing the
tax burden on the products the State forgoes revenue.

undertakings

favours

certain

and

the water

Italy emphasized that
is only temporarily
of
preparation for
present
improving combustion with a consequent reduction in
polluting emissions and environmental benefits.

purpose

in the

the

(28)

The measure is selective because emulsions production
requires specific know-how and specific equipment and
the emulsions are sold to a limited number of customers.
Therefore, the entry costs into the emulsions market are
high. Reducing tax rates for emulsions gives an advantage
to only a limited number of emulsions producers.

referred to the

Italian authorities

The
comments
submitted by the Unione Petrolifera to the Commission
on the beneficiaries of the aid at issue. In consideration
of these comments, the Italian authorities undertook to
suspend the payment of the aid at issue if the beneficiary
was a company that had not yet reimbursed or paid into
a blocked account any illegal and incompatible aid
received on the basis of one of
the aid measures
mentioned by the Commission.

(29)

the prices

the tax rebates,

In consequence of
for
emulsions can be lowered to a level that is competitive
with fossil fuels. Since emulsions serve as a substitute for
fossil fuels, this advantage may distort competition in the
EU internal market. As fuels are tradeable internationally,
the measure is also likely to affect trade between Member
States and therefore constitutes State aid pursuant
to
Article 87(1) of the EC Treaty.

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Exemption under Article 87(3)(c) of the EC Treaty

(30) Article 87(3)(c) of the EC Treaty provides an exemption
incompatibility with the
from the general
rule of
common market as stated in paragraph (1) of
that
Article for aid to facilitate the development of certain
economic activities or of certain economic areas, where
such aid does not adversely affect trading conditions to
an extent contrary to the common interest.

(33) According to section E.3.3 of the Community Guidelines
on State aid for environmental protection (15) (the Envir-
the
onmental Aid Guidelines), operating
production of
be
allowable. The Commission takes the view that such
aid qualifies for special treatment because of the diffi-
culties
sometimes
encountered in competing effectively with conventional
sources.

for
usually

energy will

sources of

renewable

energy

these

have

aid

(31)

(32)

that

The proposed aid measures are designed to enhance the
use of environmentally friendly fuels in order to reduce
including particulates, and slightly
pollutant emissions,
emissions. The Commission
reduce greenhouse gas
notes
and the
reduction of pollutant emissions have been encouraged
since 1985 by numerous Community measures (10), the
most recent overview being the Thematic Strategy on Air
Pollution (11). The objectives of the present scheme are in
line with EU policy in this sector.

reduction of

these gases

the

Emulsion fuels are not
included in the definition of
renewable energy sources in Directive 2001/77/EC of
the Council of 27
the European Parliament and of
September 2001 on the promotion of
electricity
produced from renewable energy sources in the internal
electricity market (12) and are not considered biofuels by
Directive 2003/30/EC of the European Parliament and of
the Council of 8 May 2003 on the promotion of the use
of biofuels or other renewable fuels for transport (13).
However, using emulsion fuels results in a reduction in
pollution and greenhouse gas emissions. The measure
therefore contains a clear environmental benefit. This
was also confirmed by the Auto-Oil II programme (14).
The Commission recalls that emulsion fuels have been
shown to result in a 59 % reduction in particulates, a 6 %
reduction in nitrogen oxides (NOx) and a 32 % reduction
in carbon monoxide (CO) (actual reductions depend on
the waterdiesel
tests and studies have
reported minor reductions in greenhouse gas emissions.
These benefits are fully in line with Community environ-
mental policy.

ratio). Other

supply

in the

on energy

(10) Among others, the White Paper of 1997 on renewable energies
the Commission Green
(COM(1997) 599 final, 26.11.1997),
paper
European Union
safety
(COM(2000) 769, 29.11.2000), and the Commission’s communi-
cation on alternative fuels for road transport and on a set of
measures
(COM(2001) 547,
7.11.2001).
(11) COM(2005) 446.
(12) OJ L 283, 27.10.2001, p. 33.
(13) OJ L 123, 17.5.2003, p. 42.
(14) See the final report on the Programme prepared for DG Energy on

to promote the use of biofuels

(34)

in the

the Environmental Aid Guidelines defines
Point 6 of
renewable
as Directive
same way
energy
2001/77/EC. As explained above, the emulsions do not
fall within this definition. For the following reasons,
the notified
however,
aid can be assessed by analogy with point E.3.3. of the
Environmental Aid Guidelines:

the Commission considers that

— As explained in paragraph 31 above, the scheme is in
line with Community policy objectives and it adds to
the improvement of environment.

— The emulsions face similar difficulties as fuels derived
in
(e.g. biofuels)
from renewable energy sources
from conventional
competing effectively with fuel
sources: namely high (initial) production costs,
lack
of accommodating infrastructure in the distribution
chain and lack of users with appropriately adapted
combustion systems in their vehicles.

— Distortion of competition with respect to conven-
tional
fuels will be relatively limited given the
strong position conventional fuels still have on the
market and given the limited number of emulsions
users.

— Distortions of
to
trading conditions with respect
conventional
fuels will also be limited because of
specific transport and storage needs of emulsions,
e.g. the need for periodical reprocessing.

the following website:
http://ec.europa.eu/energy/oil/fuels/doc/alternative_fuels_en.pdf

(15) OJ C 37, 3.2.2001, p. 3.

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— Italy will submit monitoring reports that will enable
the Commission to assess the application of
the
scheme.

(35) According to point 56 of

for

aid

the

operating

the Environmental Aid
Guidelines,
production of
renewable energy may be allowable. Point 56 of the
Environmental Aid Guidelines provides for aid to cover
the difference between the costs of producing energy
from renewable energy sources (in the present case
emulsions) and the market price of that energy. This
the production costs of emulsions, after
implies that
taking into account the aid, should not show any over-
compensation, i.e. should not be below the market price
of
energy
sources for which no aid is granted.

energy obtained from fossil

comparable

(36)

Italy supplied production cost calculations based on the
for 2006. The main factor determining the
data
production costs of emulsions is the price of the raw
materials (e.g. surfactant and antifreeze) that must be
fuels and water. Further costs are
added to fossil
logistics costs such as storage in special
tanks and
In addition to the
in dedicated lorries.
transport
production costs it has to be taken into consideration
that, due to the lower energy value of emulsions in
comparison to
consumption of
fuels,
emulsions is estimated to be 10 % higher. Furthermore,

fossil

the

(e.g.

tanks

cleaning

using emulsions imposes additional operating costs on
consumers
recirculation
systems). The calculations of total emulsions production
costs include a fair profit margin of 5 %. The market
price of fossil fuels reported by Italy for comparisons
with gas oil emulsions is an average of the prices of
gas oil over the first 15 days of March 2006 (16).

and

(37)

(38)

From the table below, which is based on the information
provided by Italy,
the aid enables
is clear
producers to sell the emulsions at a price that is just
sufficient to compete with fossil fuels.

that

it

In order to avoid overcompensation during the entire
period of the scheme, Italy has undertaken to monitor
changes in fossil fuel prices and emulsions production
costs every six months. Where the difference between
the production costs of emulsions and the reference
price of fossil fuels exceeds the value of the reduction,
Italy will adjust the tax rebate to avoid overcompen-
sation.

(16) For comparisons with heavy fuel oil emulsions an average market
price surveyed by the Milan Chamber of Commerce has been used.

Raw materials:

(A) Fossil fuel

(B) Deionised water

(C) Surfactant and research amortization

(D) Antifreeze

(E) Cetane improver

(F) Bactericide

Logistics costs:

(G) Storage in tanks

(H) Transport in special lorries

Water emulsions with:

gas oil, used in
transport

gas oil, used for heating

low sulphur heavy fuel
for heating

387

0,5

62

8

3,5

1

6

4

387

0,5

62

8

3,5

1

6

4

362

0,5

14,5

6

4

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Water emulsions with:

gas oil, used in
transport

gas oil, used for heating

low sulphur heavy fuel
for heating

(I) Other costs (extraordinary)

(J) Production costs

(K) Total costs: sum from A to J

(L) Profit margin: 5 % of K

1

10

483

24,15

1

10

483

24,15

(M) Total, excluding taxes: K + L

507,15

507,15

(N) Emulsion excise tax

(O) Energy content adjustment factor:

10 % of (M + N)

(P) Extra operating costs

(R) Emulsions end price excl. VAT:

(M + N + O + P)

(S) Fossil fuels end price excl. VAT (*)

Difference (R – S) (**)

256

76,31

10

245

75,21

10

849,46

837,36

502,14

843

6,46

831

6,36

490

12,14

1

10

398

19,9

417,9

29,5

44,74

10

(*) This refers to the average price for Platt’s Low sulphur Diesel over the first 15 days in March 2006 + EUR 25/1 000 litres which corresponds to
an average of the difference between the extra-network price and Platt’s. It has been assumed that the density of the gas oil is 0,845 kg/l. For heavy
fuel for heating the price refers to the average market price surveyed by the Milan Chamber of Commerce.

(**) If the difference is positive, the level of aid is allowable. If the difference is negative, the level of aid is too high and results in overcompensation.

(39)

The Commission thus comes to the conclusion that the
aid is restricted to covering the difference between the
cost of producing energy from renewable energy sources
and the market price of that energy and that there is no
overcompensation within the meaning of the Environ-
mental Aid Guidelines.

of the internal market and do not result in a distortion of
competition.

(42)

(43)

(40) As the measure concerns an excise tax rebate for an
energy product, the Commission also assessed it with
respect to the Energy Tax Directive.

(41)

The Energy Tax Directive lays down minimum levels of
taxation for energy products. As far as fuel blends are
concerned, the minimum levels are applicable to final
products. In order to implement policies appropriate to
national circumstances, the Energy Tax Directive allows
Member States to apply exemptions and tax rebates
when they are not detrimental to the proper functioning

In principle Article 5 of the Energy Tax Directive allows
Member States to reduce tax rates of final fuel products
from the normal rate to a level not
lower than the
minimum level of taxation in certain cases, e.g. when
the fuels.
there is an improvement
an
apply
Article 16 allows Member
exemption or reduced rate of taxation to the renewable
and to the water part of the blend.

in the quality of
States

to

In order to apply Article 5 as justification for tax rebates,
emulsions must be fuels with improved quality in
fuels. The infor-
comparison to corresponding fossil
mation provided by Italy and the comments of
the
third parties clearly prove that adding water to fossil
fuel changes its physical characteristics and brings en-
vironmental benefits.

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(44) After adding water the fuel changes with regard to its
appearance, density, viscosity and caloric value. The
presence of water improves the combustion quality and
results in less polluting emissions of PM particulates,
Therefore
nitrogen
emulsions can be treated as an improvement
in the
quality of
fuels as such. Applying Article 5 to
emulsions allows reduction of the excise tax rate to the
minimum level specified in the Energy Tax Directive.

dioxide.

carbon

oxides

fossil

and

In the case of gas oil emulsions used as motor fuel, Italy
makes use of Article 16 and,
starting from the
taxation of EUR 302,
Community minimum level of
the blend. Therefore the
exempts the water part of
is 15 % below the
final
minimum tax rate and it amounts to EUR 256,7.

emulsions

tax for

these

The Commission finds that,
in the particular case of
emulsions, this approach is justified by Article 5 and
Article 16 of
the Energy Tax Directive, considered
jointly. Adding water to fossil fuels results in a physically
different product with improved combustion quality and
consequent environmental benefits. This gives rise to the
the
application of
Directive. Simultaneously,
the final product contains
15 % water, which is eligible for tax concessions in
accordance with Article 16.

indent of Article 5 of

the first

in the context of

this
Italian authorities undertook,
measure, to suspend the payment of the aid at issue if
the beneficiary was a company that had not yet reim-
bursed or paid into a blocked account any illegal and
incompatible aid received on the basis of one of the aid
measures mentioned by the Commission in its decision
initiating the procedure.

(50)

The Commission further notes that during the procedure
under Article 88(2) of the EC Treaty it did not receive
any comments from third parties that the proposed aid
may affect trading conditions and distort competition to
an extent contrary to the common interest.

VII. CONCLUSIONS

(51) On the basis of the foregoing, the Commission concludes
that the measure complies with the relevant provisions of
the Environmental Aid Guidelines applied by analogy and
the relevant provisions of
the Energy Tax Directive.
Furthermore,
Italy has undertaken to suspend the
granting of new aid under the current scheme to firms
reimbursed the incompatible aid in
which have not
recovery
the
compliance with
deemed
decision. The measure
compatible with the
to
Article 87(3)(c) of the Treaty,

previous
relevant
can therefore be

common market pursuant

For the reasons stated above, the reductions in taxation
for emulsions proposed by Italy are in conformity with
the Energy Tax Directive.

HAS ADOPTED THIS DECISION:

Article 1

(45)

(46)

(47)

(48)

The measure which Italy is planning to implement
rebates on emulsions
million,
meaning of Article 87(3)(c) of the Treaty.

for tax
for 2006, amounting to EUR 8,9
is compatible with the common market within the

Implementation of the measure is accordingly authorised.

Article 2

This Decision is addressed to the Republic of Italy.

Done in Brussels, 6 December 2006.

For the Commission

Neelie KROES
Member of the Commission

the

excise

in particular under

Further, the Commission pointed out the problem of
potential cumulation of the distortion arising from the
aid under
reduction scheme and other
distortions deriving from other illegal and incompatible
the schemes mentioned in
aid,
paragraph 14, which has not yet been reimbursed.
According to the Court of Justice judgment of 15 May
1997 (17), the compatibility of new aid could depend on
the existence of any previous unlawful aid that has not
been repaid, since the cumulative effect of the aid could
distort
to a
significant extent.

competition in the

common market

(49)

The Commission notes that, as regards the application of
the Deggendorf judgment, Italian authorities referred to
the comments submitted by the Unione Petrolifera to the
Commission, which stated that ‘the beneficiaries of the
aid at issue are different from the beneficiaries of the so-
called illegal aid’. In consideration of these comments, the

(17) Case C-355/95P Textilwerke Deggendorf GmbG (TWD)

v

Commission [1997] ECR I-2549, paragraphs 25-27.