State of play, main conclusions, outlook

The Treaty on the Functioning of the EU (‘TFEU’) generally prohibits State aid. However, the Commission may authorise State aid under certain conditions, notably for reasons of economic development or the common good. Pursuant to Article 108(3) TFEU, Member States must notify State aid to the Commission, which assesses the aid on the basis of State aid Guidelines. However, to simplify procedures, the Commission has adopted regulations exempting certain aid categories from the notification requirement (known as Block Exemption Regulations and de minimis aid Regulations).

The Commission had last revised the framework of agricultural State aid rules in 2014, widening the scope for exempting aid from the notification requirement. This allowed to simplify State aid procedures and focus State aid control on cases that could have an important impact on the internal market. De minimis aid is perceived as being a useful tool to react quickly to urgent problems with less administrative costs, in particular regarding aid to SMEs.

The Commission amended the Regulation on de minimis aid for farmers in February 2019 to increase the maximum amount of such aid. This further reduced the need for State aid procedures and could thereby lead to savings in administrative costs for national administrations.

In 2020, the validity of the 2014 Agricultural State aid Guidelines (2014 Guidelines⁵) and the 2014 Block Exemption Regulation (2014 ABER⁶ ) was prolonged until end of 2022.

On 14 December 2022, the Commission revised the ABER and the Agricultural Guidelines, aligning them with the Common Agricultural Policy (CAP) and the European Green Deal.

The new ABER declares specific categories of aid compatible with EU State aid rules and exempt them from the requirement of prior notification to and approval by the Commission, provided that they fulfil certain conditions. This enables Member States to quickly provide aid, where conditions limiting the distortion of competition in the Single Market are met. The rules laid down in the ABER are complemented by those set out in the Agricultural Guidelines, which set the conditions under which the Commission assesses whether State aid measures that are not block-exempted are compatible with the Single Market.

The new ABER has a considerably wider scope as compared to the 2014 ABER, block-exempting up to 50% of cases, which before were still subject to notification.

Estimated savings and benefits

Savings and benefits will result from new categories of block-exempted measures introduced by the new ABER, such as aid to prevent or compensate damage caused by protected animals, aid in favour of environmental management commitments and aid for cooperation in the agricultural and forestry sectors.

The new ABER also introduced a new ceiling for European Innovation Partnership Operational Group projects aimed at innovations in the farming sector and in rural areas. Projects below €500,000 (or, alternatively, up to €2 million per undertaking) are now block-exempted.

Based on the experience gained by the Commission, the new rules will block-exempt up to 50% of cases which before were subject to notification.

The new Agricultural Guidelines established, among other things, a new, simplified procedure for the authorisation of State aid for measures co-financed under the CAP.

Fit for Future Platform

On 28 January 2022, the Fit for Future Platform (F4F) adopted an opinion on the 2014 Agricultural Guidelines and the 2014 ABER in view of their potential for simplification and reduction of unnecessary costs.

The Platform’s opinion fed into the problem definition of the impact assessment report, which accompanies the new State aid rules in the fields of agriculture, forestry and rural areas adopted on 14 December 2022. The suggestions formulated by the Platform thus strengthened the evidence base underlying the new rules.

The majority of the issues raised in the opinion were also substantiated by other evidence, such as the evaluation of the 2014 Guidelines and the 2014 ABER, and are reflected in the new rules.

The Platform made in its opinion seven suggestions:

Suggestion 1: Simplify the rules and improve their consistency with green policies

Suggestion 2: Align the scope of the notion ‘damage’ to achieve a coherent use throughout the guidelines

Suggestion 3: Simplify aid to the forestry sector, through more streamlined rules

Suggestion 4: Align the risk management loss thresholds with the new CAP requirements

Suggestion 5: Simplify aid to small farmers by further reducing administrative burden

Suggestion 6: Formulate eligible costs more comprehensively

Suggestion 7: Explore the possibilities for introducing result-oriented State aid

The Platform underlined that the agricultural sector must become more resilient and self-reliant and must encourage transition to greened policies. The Platform made several proposals for the ABER to reach these goals.

Even before the revision, the 2014 ABER contained already many measures relating to environment in the agricultural and forestry sectors and in rural areas. The Commission’s revision established even more ambitious rules, capable of contributing to achieving the objectives of the European Green Deal, as expressed in the ‘Farm to Fork’ Strategy, the 2030 Biodiversity Strategy and the 2030 Forestry Strategy, as well as the targets set out by the European Climate Law.

Based on case experience gained by the Commission under the 2014 Agricultural Guidelines, it is now possible to block-exempt measures with management commitments, which are beneficial for the environment or the climate (both, in the agriculture and in the forestry sectors). Aid measures that compensate for disadvantages related to Natura 2000 have now also been included in the new ABER. This is in line with the Platform’s suggestion 1.

Regarding the point raised by the Platform that some measures and content of the Green Deal should not be regarded as State aid, the Commission Notice on the notion of State aid (2016/C 262/01) provides guidance for those cases where a measure/operation does not meet the Article 107(1) TFEU requirements and thus does not constitute State aid. This Commission notice applies across all sectors, including agriculture, forestry and rural areas and it is in line to the Platform’s suggestion.

The Platform also mentions the possibility to raise the maximum aid intensities as regards green investments. This is followed up by the new ABER which, in line with the reformed CAP policy, raised the maximum aid intensities from 40% to 65 %. In addition, when the investment is linked to environmental objectives, the maximum aid intensity can now be increased up to 80% for productive investments (and up to 100% for non-productive investments, as it was already the case before).

The Platform also suggests that the guidelines add in the section concerning aid to compensate for thedamage caused by protected animals, the loss of income due to the total or partial destruction of agricultural production and the means of production. This is also the case for the calculation of aid to compensate for damage caused by other risk events (natural disaster or exceptional occurrences or by adverse climatic events which can be assimilated to a natural disaster). The Platform suggests to include aid to compensate for the damage caused by protected animals in the ABER.

Given the considerable experience gained during the period 2014-2022 with such aid notified under the Guidelines, the Commission now included a new article on aid to make good the damage caused by protected animals in the ABER thus following the Platform’s suggestion. Eligible costs (both, under the new Agricultural Guidelines and the ABER) now also include the loss of income due to lower yields linked to attacks by protected animals.

The Platform underlined that under the 2014 rules, State aid to the forestry sector still needed to be notified to the Commission if the measure was not covered by the Member State’s rural development program. It suggested that the ABER covers forestry aid to simplify procedures.

Already under the 2014 ABER, it was possible to exempt aid for knowledge transfer and advisory services in the forestry sector, even if not co-financed by the EAFRD. For the sake of simplification and procedural economy, the Commission – in the new ABER – now exempted most aid measures in favour of the forestry sector from the notification obligation irrespective of whether they are co-financed by the EAFRD. This includes aid for afforestation and creation of the woodland; aid for agroforestry systems; aid for the prevention and restoration of damage to forests; aid for investments improving the resilience and environmental value of forest ecosystems; aid for area-specific disadvantages resulting from certain mandatory requirements; aid for forest-environmental-climate services and forest conservation; investments in infrastructure related to the development, modernisation or adaptation of the forestry sector; aid for investments in forestry technologies and in processing, in mobilising and in marketing of forestry products; aid for conservation of genetic resources in forestry; start-up aid for producer groups and organisations; aid for forestry land consolidation; aid for cooperation in the forestry sector and aid for investments in favour of the conservation of cultural and natural heritage located in forests.

In view of the greater potential impact of large schemes on trade and competition, aid schemes with an average annual State aid budget exceeding a threshold based on an absolute value is subject to State aid evaluation. Due to the high risk of adversely affecting trading conditions, large amounts of aid granted either individually or cumulatively is still to be assessed by the Commission upon notification. Thresholds by maximum aid amount have therefore been introduced for certain categories of forestry aid.

Regarding aid for forest-environment and climate services and forest conservation, the Platform requested the relaxation of certain conditions for such aid (aid per hectare limited to a maximum, reference to the area and the duration period). The new Agricultural Guidelines respond to this request, as maximum aid amounts for forest-environment and climate services and forest conservation were abolished and replaced by a 100% aid intensity (i.e. full compensation of additional costs and loss of income resulting from the commitments made). Furthermore, the 2014 Guidelines already provided for the possibility to grant aid as a flat-rate or one-off payment per unit for commitments to renounce the commercial use of trees and forests, calculated on the basis of additional costs incurred and income foregone. This rule is maintained in the new Guidelines.

The Platform noted that to be eligible for State aid under the 2014 Guidelines, an adverse climatic event should destroy at least 30% of the production, which is not in line with the 20% proposed in Regulation 2021/2115.

The new Guidelines keep the 30% threshold. While the lowering of the loss threshold for adverse climatic events to 20% would have increased the consistency with the CAP for this very measure, it could have had a negative impact on farmer’s adaptation to climate change. Loss thresholds should have an incentive to properly assess the risk of farming. Lowering the threshold from which compensation for losses can be paid lowers the incentive for proper risk management. Farmers might be more prone to growing crops, which are not or no longer suitable for a certain area due to recurring adverse weather conditions. This could run counter to the Green Deal objective of climate change adaptation in agriculture.⁷

The Platform pointed out that the calculation of loss of income was not adapted to small farmers who bear high administrative burden to collect the large amount of data that is not proportionate to the relatively small amount of aid that such farmers obtain. Simple aid mechanisms should be provided. The new Guidelines, in line with the Platform’s suggestion, introduced the option of simplified costs to several types of aid that can be a mean to alleviate administrative burden also for small farmers.

As regards State aid, Article 107(1) TFEU provides that any aid granted by a Member State or through State aid resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings is prohibited. As a consequence, aid provided even to small undertakings should comply with this general rule. On the other hand, small amounts of aid that fulfil the conditions of the Agricultual de minimis Regulation is deemed not to entail State aid as it does not distort or threaten to distort competition, being therefore exempted from the notification requirement.

According to the Platform, the previous Article 24 (6) ABER on aid for promotion measures in favour of agricultural products could further be elaborated with the description of the eligible costs regarding benefits in kind under Article 24 (6) (a).

No fundamental changes were included in the new ABER, as the application of this provision has not proved to raise concerns.

The Platform pointed out that the 2014 Guidelines only allow to compensate additional costs and/or losses associated with e.g. conservation or additional management measures implemented by the beneficiary. It does not allow for providing support for achieving public goods e.g. increased carbon sink or increased number of habitats or species (result-oriented aid) as the new CAP Regulation allows. It thus proposed to align State aid to the CAP Regulation in this regard.

Farming measures could already be supported under the rules in force at the time of the Platform´s suggestion. Such measures including investment aid, aid for agri-environment-climate commitments and animal welfare commitments, aid for disadvantages related to Natura 2000 and the Water Framework Directive or aid for organic farming, are maintained in the new rules. In addition, the new rules also make support possible (in line with the new CAP Regulation) in the case of ‘collective schemes and result-based payment schemes’. Where such schemes are mentioned in the new Agricultural Guidelines (e.g. aid for agri-environment-climate commitments, aid for forest-environment and climate services and forest conservation), it has been specified that this also includes carbon farming schemes. Such specific reference to carbon farming complies with the strategy on adaptation to climate change and with the European Climate Law. In addition to that, in order to increase the currently low uptake of forest-environment climate services, the Agricultural Guidelines introduced the possibility of an incentive payment of up to 120% of the eligible costs for biodiversity, climate, water or soil related services and collective and result-based schemes, such as carbon farming schemes in forestry.

¹ https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/2089-Agricultural-State-aid-guidelines-review_en

² Commission Regulation (EU) 2022/2472 of 14 December 2022, OJ L 327, 21.12.2022, p. 1

³ OJ C 485 of 21.12.2022, p. 1

⁴ OJ L 352, 24.12.2013, p. 9–17

⁵ Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (OJ C 204, 1.7.2014, p. 1–97).

⁶ Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union (OJ L 193 1.7.2014, p. 1–75).

⁷ Cf. impact assessment report on the revision of the agricultural State aid rules https://ec.europa.eu/transparency/documents-register/detail?ref=SWD(2022)418&lang=en