Research & Development & Innovation (R&D&I)

In October 2022, the European Commission released the new Framework for State aid for research and development and innovation – an update of the 2014 version. It describes the criteria that are used by the European Commission to assess State aid granted by Member States to encourage and stimulate new investments in R&D&I activities in Europe, especially those that would remain un- or under-realised without State support due to market failures. Certain R&D&I grants may be considered compatible with the internal market if they fulfil a number of conditions presented in this document.

The R&D&I framework applies across all technological domains, industries, and sectors. The Commission has specified R&D&I initiatives for which State aid may be compatible with the internal market. These initiatives include:

• Funding for R&D projects, including support for feasibility studies
• Funding for establishing and enhancing research infrastructure
• Support for developing and enhancing testing and experimentation infrastructure
• Grants for innovation activities conducted by SMEs
• Assistance for process and organisational innovation
• Funding for innovation clusters.

For each one of them, the eligible costs and the maximum State aid intensity are described in the framework’s annexes.

The R&D&I framework applies to State aid only, meaning public funding granted by Member States to companies for specific projects in various industries that promote R&D and innovation – known to be key drivers for Europe’s competitiveness. Hence, it is the Member States who propose and design public funding measures in support of such projects that fall under the R&D&I framework, according to their national strategies. The European Commission oversees the coordination and management of the R&D&I framework. It supervises, guides, and validates the measures put forth by Member States, ensuring their compliance with the R&D&I framework. In particular, State aid measures for R&D projects above 25 M€ per company per project must be individually notified to the European Commission (DG Competition). The Treaty on the Functioning of the European Union prohibits the implementation of State aid measures by Member States without or before a Commission’s decision.

The process for securing public funding under the R&D&I framework starts with the project application at national level, following the publication of a dedicated call for projects where the national authority publishes the eligibility and evaluation criteria. Detailed information on upcoming calls for projects is country-specific. Then, the national authority undertakes a thorough evaluation of the proposals and selects the most promising projects. Selected proposals with large State aid amounts are then passed on to the European Commission for a detailed assessment along the criteria laid out in the R&D&I framework (State aid notification). The Commission, after its review, decides on whether the proposal merits approval. If it obtains the Commission’s clearance, the project promoter finalises a funding agreement with the national authorities. With the agreement in place, the project enters its implementation phase. Throughout this stage, project promoters are mandated to periodically update both the national authorities and the European Commission on their progress and any significant developments.

While the R&D&I framework eligibility and compatibility criteria vary depending on the project, they typically revolve around the following axes:

• Compatibility with EU political objectives
• Ensure the project facilitates the development of an economic activity that is aligned with the European Union’s objectives.
• Incentive effect: State aid should induce the beneficiary to change its behaviour, to engage in additional economic activity or in a more
• R&D-intensive activity, which it would not carry out without the aid or would carry out in a restricted or different manner.
• Necessity and proportionality: The State aid must be necessary to implement the project, and the aid amount must be limited to the minimum needed for carrying out the aided project (funding gap approach).
• Preservation of competition: State aid must not provide disproportionate or unfair advantages to the beneficiary over its competitors.

european economics has an important track record for projects supported under the Framework for State aid for research and development and innovation: we supported 45 projects, of which 33 successfully secured €4.0 billions in public funding. We have extensive experience with the new R&D&I framework of 2022 and we can capitalise on it to support our clients who target large State aid amounts for R&D projects, innovation clusters and research infrastructures.