2. State aid – disillusion, but the detailed rules still unknown
Point 27 of the Commission Guidelines forms in my opinion the greatest danger to the viability of the project consisting in making use of the derogation provided for in the Article 10c of the Directive 2003/87. The problem of state aid regarding free allocations appeared already in the first and second trading periods, but taking into account the general rule of grandfathering in the years 2005 – 2012, there was adopted a simplified approach thereto.
As opposite, in the third trading period the general rule is auctioning and every entity getting allowances for free faces the problem of state aid. The current guidelines didn’t contribute so far to resolve these potentially complicated issues because the Commission only intends to adopt compatibility criteria for assessment of this type of aid in the near future. It will be, however, very interesting piece of legal analysis burdened with far-reaching consequences. These compatibility criteria should be of utmost importance to every economic operator taking part in the EU ETS - for obvious reasons, for those potentially benefiting from Article 10c, and for others wishing, for instance, to examine the possibilities for challenging the competitiveness practices in the EU ETS.
If somebody hoped so far that submitting national plan for investments, pursuant to Article 10c(5) of Directive 2003/87/EC, and any consequent decision by the Commission, would in any way resolve the question of state aid, he should now, after publication of the guidelines, have no illusions about it.
The Commission clearly decided that above-mentioned procedure is entirely without prejudice to Member States' State aid notification obligations pursuant to Article 108 TFEU. Member States must notify measures involving state aid to the Commission pursuant to Article 108(3) TFEU. The Commission reminded that following notification, Member States might not put proposed measures into effect until this procedure resulted in a final decision by the Commission.
The issues that rise concerns from the point of view of installations hoping for free allocations on the basis of Article 10c of the Directive, are in particular the following.
The Commission remarked in the guidelines that Member States should plan for any required State aid notifications, but question arises when and how the Member States should do so, as the time lapses fast and the Commission didn’t even publish up to now the rules governing the process. It follows that there are some problems with deadlines but there can also be expected content–related complications.
The specification for methods allowing to ensure that free allocations do not result in undue distortions of competition, is a crucial issue.
It seems, furthermore, that national plan will in principle concentrate aid on a limited number of beneficiaries: legal measures provided for in Article 10c are designed, as regards territorial scope, for several Member States only, and from a sectoral point of view, for electricity generators. To demonstrate that the aid is not likely to reinforce the beneficiaries' market position is a real challenge and the Commission leaves the Member States up to now entirely without directions.
The aid mustn’t, however, in any way unduly distort competition ‘beyond what is strictly necessary in the light of the overall objectives of this Directive’ (I draw the attention of the reader to next notion subject to very discretionary interpretation).
In the light of the above remarks, despite of the publication of the guidelines, Member States and the potential beneficiaries of the Article-10c-derogation are still at the very uncertain legal position as regards state aid rules.
The issues of ‘eligible investments’, ‘market value’ and ‘the mechanism to ensure the balance between amount of investments and free emission allowances’ analysed by the Commission in the guidelines are even more interesting and I make further comments thereto in the second part of these considerations.