European State aid law – a key to the European Union’s crisis management, transformation and competitiveness

European State aid law continues to play a major role in addressing current crises and driving the green and digital transformations. However, another core concern is increasingly to ensure that the European Union remains competitive in an international context. These aims had a strong effect on the year 2023.

The Temporary Crisis Framework which was again revised and partially extended in March and November 2023, continues to play an important part in overcoming the energy crisis and driving the green transformation. It continues to facilitate State aid in key areas such as generating renewable energies and the decarbonisation of the industry. Since March of 2023, Member States have also been permitted to match subsidy initiatives in non-European countries to prevent the diversion of investments from the European Union that are strategically important for the transition to a climate-neutral economy. The “matching aid clause” is to be understood as a reaction to non-European State aid initiatives, particularly the USA’s Inflation Reduction Act, and to increasingly intense global competition for investments.

A number of large State aid amounts were also approved in 2023 under the Guidelines on State aid for climate, environmental protection and energy 2022, including a State aid award of up to EUR 2 billion to support ThyssenKrupp Steel Europe in decarbonising steel production and to enable faster conversion to the use of green hydrogen. In addition, in June of 2023 another important project of common European interest (“IPCEI”) by 14 Member States entailing public aid of EUR 8.1 billion for the microelectronic and communications technology industries was approved based on the European Commission’s IPCEI Communication of 2021.

The revised General Block Exemption Regulation, which entered into force in July of 2023, is likewise intended to facilitate progress, for example in renewable energies, research and development and broadband infrastructure, by raising notification thresholds. And finally, the European Chips Act, in effect since September 2023, contributes to implementing the digital transformation. This law is intended to mobilise public and private investment amounting to EUR 43 billion, thus making it possible to expand the semiconductor industry in the European Union.

However, the extent to which intended aid projects can actually become a reality after the German Federal Constitution Court’s “budget decision” remains to be seen. This decision, handed down in November of 2023, found that the Second Supplementary Budget Act of 2021 was unconstitutional, thus voiding credit authorisations amounting to around EUR 60 billion for the climate and transformation fund. Planned support for climate projects or chip factories in Germany may feel the loss of this money.

In summary, as a catalyser for crisis management and transformation, European State aid law has been responsible for some success stories. However, it remains to be seen whether the State aid framework that has been created will result in sufficient investment to master ongoing crises while also securing the European Union’s long-term international competitiveness.

This article is part of the Competition Outlook 2024. You can find all Competition Outlook articles here.