Update on EU State aid law: Partial extension of the Temporary Crisis and Transition Framework ("TCTF")

A. Background

Following a consultation with the Member States, the European Commission (“Commission”) decided on 20 November 2023 to amend the new TCTF dated 9 March 2023. The TCTF, which was adopted in its original version on 23 March 2022 and amended several times since then, is intended to make it easier and quicker for EU Member States to approve State aid to promote green technologies and industries under State aid law (see our article here).

In light of Russia’s war of aggression, which is still impacting economic growth in the EU, the current events in the Middle East and the continuing uncertainties in the energy markets, the Commission agreed with some Member States’ demands (especially those of Germany and France). It extended the period of application for certain measures of the TCTF by a further six months (until 30 June 2024), thus preventing it from expiring at the end of the year. At the same time, slight changes were made to its content.

B. The changes in detail

Specifically, the period of application for the following measures was extended until 30 June 2024:

• Section 2.1 (limited amounts of aid): Under the conditions listed in paragraphs 60 onwards, Member States may continue to grant limited amounts of State aid beyond the end of the year. Eligible recipients are in principle companies affected by the current crisis or the ensuing sanctions and countersanctions.
• Section 2.4 (aid for additional costs due to exceptionally severe increases in natural gas and electricity prices): This section concerns options for granting State aid to compensate for higher energy prices. In addition, repayable advances, guarantees, loans and other repayable instruments granted on this basis can now be converted into other forms by 31 December 2024 (instead of by 30 June 2024).

At the same time, the ceilings for limited sums of State aid (section 2.1) have been raised slightly (in principle EUR 2.25 million instead of EUR 2 million).

C. Unchanged provisions

However, in the Commission’s view, further measures to remedy major disruptions are no longer necessary. The periods of application of the following sections have not been extended:

• The provisions in Sections 2.2 (liquidity support in the form of guarantees), 2.3 (liquidity support in the form of subsidised loans) and 2.7 (aid for additional reduction of electricity consumption) will expire on 31 December 2023 as originally planned. These types of State aid therefore have to be granted before that date.
• The provisions in Sections 2.5 (aid for accelerating the rollout of renewable energy and energy storage relevant for REPowerEU), 2.6 (aid for the decarbonisation of industrial production processes through electrification and/or the use of renewable and electricity-based hydrogen fulfilling certain conditions and for energy efficiency measures) and 2.8 (aid for accelerated investments in sectors strategic for the transition towards a net-zero economy) will continue to apply unchanged until 31 December 2025.

D. Outlook

In light of the recent ruling by Germany’s Federal Constitutional Court on the Climate and Transformation Fund (judgment of 15 November 2023, case 2 BvF 1/22) and the related uncertainties at present regarding the state’s room for manoeuvre, the partial extension of the TCTF is good news. At least until the middle of next year, certain subsidies can continue to be granted to companies currently severely affected by the sanctions and higher energy prices in a simplified and legally secure manner on the basis of the TCTF.