As Europe faces the consequences of the global climate crisis and Russia’s war in Ukraine, the European Commission adopted a new initiative named the Temporary Crisis and Transition Framework (TCTF) in March 2022 to cushion the economic impact of Russia’s aggression and to support European companies in the transition towards a net-zero economy. The core principle of this new regulation is to temporarily allow, under certain conditions that are laid down in this text, State aid – i.e. supports provided by Member States – to alleviate the economics impact of high gas and electricity prices and of disruptions of energy supply on undertakings, as well as for projects that contribute to accelerating the green transition and thus reduce emissions, reduce dependency on imported fossil fuels, and protect against price hikes. Such State aid can take the form of grants, repayable advances, tax incentives, and other support measures. They fall under Article 107(3)(b) of the Treaty on the Functioning of the European Union, meaning that they should remedy a serious disturbance in the economy of the Member State concerned.
Hence, the TCTF not only addresses the immediate energy challenges but also paves the way for a transition towards a net-zero economy in line with the ambitious Green Deal and its Industrial Plan, in a large panel of sectors and activities. In particular, under the TCTF, all industrial players can receive support for industrial decarbonization, including support for energy efficiency, electrification, and use of green hydrogen and hydrogen-derivative fuels. Energy producers can receive aid for expanding renewable energy production (e.g. solar, wind, geothermal, biomass, renewable hydrogen) and key energy storage solutions. Green tech manufacturers can be supported in producing strategic equipment (like batteries, solar panels, wind turbines, heat pumps, electrolysers and carbon capture usage and storage), related key components, and production or recycling of related critical raw materials. An ad-hoc support is available for companies at risk of investing outside the EU to incentivize them to locate the investment in the EU. Additionally, disadvantaged regions receive special attention to unlock their green growth potential.
The process for securing public funding under the TCTF 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. One important feature is that State aid measures granted under the TCTF are exempted from the notification requirement of Article 108(3) of the Treaty on the Functioning of the European Union. They shall be compatible with the internal market on the basis of a scheme, as exemplified here for a Spanish support under TCTF for the batteries value chain. One exception to this exemption is when companies acting in the cleantech sector expect to receive funding amounts above the thresholds of 150, 200 or 350 M€ based on the amount of which they could demonstrably receive for an equivalent investment in a third country jurisdiction outside the EEA – clearly a way to counterstrike the US Inflation Reduction Act.
To ensure that aid under the TCTF is consistent with the principles of the Green Deal, companies that receive aid must pursue investments that contribute to the transition to a carbon-neutral economy. Specifically for industrial decarbonisation, the investment must enable the company to reduce direct greenhouse gas emissions from its industrial installation by at least 40% or/and reduce energy consumption in industrial installations in relation to the aided activities by at least 20% compared to the situation before the aid. Eligible costs and maximum State aid intensities depend on the type of activity that is supported under the TCTF (e.g., 15%, 20% or 35% for cleantech manufacturing projects, depending on their location).
european economics has a long track record of support to renewable energy, decarbonisation and cleantech manufacturing projects. As such, we can support our clients applying for TCTF funding with such projects to carry out project design and engineering in order to maximise the request for funding and minimise the risk of failure, to prepare application files, and throughout the notification procedure to the European Commission to obtain its validation – an area in which european economics has a 100% success rate.