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Revised Guidelines on Regional State Aid: Some New Opportunities for Increased Grant Aid

AUTHORs: Kate McKenna co-author(s): Mollie Barlow Services: Competition and Regulation DATE: 12/05/2021

The European Commission has adopted revised Guidelines on Regional State Aid which will enter into force on 1 January 2022.  The revised Guidelines bring about good and bad news for Irish granting authorities and prospective Regional Aid recipients.  In particular, while permissible aid intensities for investment aid will increase, the total number of geographic areas in which Ireland may grant regional aid will become more limited. 

By way of background, Regional Aid is a significant tool which is widely utilised by Member States, including Ireland, to improve regional development and to attract inward investment.  In particular, the State aid rules on Regional Aid allow each Member State to provide enhanced rates of State Aid in the least economically developed areas of each country.

In terms of the relevant context, the revised Guidelines have been adopted subsequent to the announcement of the European Green Deal and the European Industrial and Digital Strategies. In particular, the Commission has incorporated specific provisions in the Guidelines to enable support in the context of the EU Just Transition Fund, to assist in dealing with the repercussions of progressing towards a climate neutral EU by the year 2050 (1.7 of the Guidelines).  As a result, Executive Vice-President Margrethe Vestager, who is in charge of EU competition policy, noted that the revised Guidelines provide for enhanced opportunities for Member States to assist areas encountering transition or structural challenges (e.g. depopulation). 

The Guidelines explain in detail the criteria for both (i) identifying the relevant geographic areas (“assisted areas”), and (ii) implementing regional aid that is compatible with the State aid rules under the Treaty on the Functioning of the European Union (“TFEU”). 

The revised Guidelines bring about increases to maximum aid intensities which may be granted in assisted areas.  Within this, the Guidelines have maintained higher maximum aid intensities for SMEs than large enterprises - aid intensities may be increased by up to 20 percentage points for small enterprises and up to 10 percentage points for medium-sized enterprises (7.4.3).  Under the revised Guidelines, aid intensity for large enterprises in ‘c’ areas must not exceed:

  • 20% in sparsely populated areas and areas that share a land border with a country outside the EEA or EFTA (previously 15%);
  • 15% in former ‘a’ areas which may be increased by up to 5 percentage points until 31 December 2024 (previously the aid intensity of 10% in former ‘a’ areas was permitted to be increased by up to 5 percentage points from 1 July 2014 to 31 December 2017);
  • 10% in non-predefined ‘c’ areas that have a GDP per capita above 100% of the EU27 average and an unemployment rate below 100% of the EU27 average, and 15% in other non-predefined ‘c’ areas (previously it was 10% in all non-predefined ‘c’ areas).

These aid intensities may also be increased in regions experiencing population loss.

As noted above, the total number of geographic areas in which Ireland may grant regional aid will become more limited as a result of the revised Guidelines.  In particular, the permissible level of regional aid coverage and total population coverage has been reduced from 51.28% to 35.90%, such that Ireland will need to revisit its current Regional Aid map which dates from 2014.

Finally, the revised Guidelines clarify a number of complex legal matters, including the criteria utilised to define the positive effects of aid and the negative repercussions it has on competition.  Additional effects may now also be relied on by the Commission, for example a significant effect on the green and digital transitions. 

Overall, we see the revised Guidelines as a positive development for Irish granting authorities and prospective Regional Aid recipients and we look forward to seeing them put into practice from 2022 onwards.