Ian Rodgers Chairman, BUSINESSEUROPE State Aid Working Group Director, UK Steel Globalisation, financial crisis, innovation and climate change: challenges for a modern State aid policy

State aid – general principles Minimise state interference in markets, allowing the most competitive firms to thrive. Requires consistency of approach across the whole of the EU. But rules must be clear and predictable for companies; And transparent in their application.

State aid and globalisation - 1 Europe should not attempt to use aid to compete with low cost economies, apart from: –Rescue & restructuring aid –Regional investment aid Focus on skills base and innovation.

State aid and globalisation - 2 The EU should make full use of WTO rules to discipline overseas subsidies and other market-distorting practices. DDA should have been an opportunity to improve their application. Write additional disciplines into future FTAs.

The financial crisis A return to worldwide subsidisation and protectionism would prolong the crisis. –The EU has an opportunity to lead by example. Communication on aid to financial institutions strikes the right balance: –Art. 87(3)(b) invocation is justified; –Impacts on competitors are minimised; –Rapidity of response applauded.

State aid and innovation 2006 Framework is an improvement. But serious concerns that some aspects will deter R&D funding, particularly: –Detailed assessment, and requirement for counter-factual incentive effect analysis. –Rigid categorisation of types of R&D. Shortcomings perpetuated in block exemption Regulation.

State aid and climate change New guidelines expand the scope for encouraging investment in, and operation of, carbon-efficient technologies: –Negative: incentive test is repeated. –Positive: distortions of competition through energy savings are prevented. CCS correctly to be considered later.

UK Steel State aid and the EU Emissions Trading Scheme: post-2012 The draft Directive as published by the Commission could drive energy-intensive manufacturing out of the EU. Amendments to correct this are opposed by DG Competition because of their perceived relationship with competition/state aid policy. However, neither articles 81 to 86 nor articles 87 to 89 are applicable.

Conclusion The EUs unique state aid rules are a vital component of a vigorous and enterprise- oriented single market. We welcome: –The process of continuous appraisal and improvement; –The Commissions openness to input from stakeholders.