1. Humbert DRABBE Director Directorate H DG Competition State Aid Modernisation Compatibility assessment and revision of State aid guidelines

2. 1. Scope of the review

3. Two key proposals Identification and definition of key assessment criteria Horizontal approach to ensure a consistent approach Building on existing best practices (e.g. broadband) Revision and streamlining of State aid guidelines, to make them consistent with these criteria: 1 st stage: Regional aid, R&D&I, Environmental aid, Risk capital, Broadband (+aviation, R&R) 2 nd stage: other guidelines to be progressively aligned

4. Scope of future compatibility assessment An assessment which first ensures that certain key criteria are met: Incentive effect, market failure, aid limited to the minimum Speedier treatment of well-designed measure, otherwise, more thorough analysis Extended scope of the GBER A substantive analysis of aid measures so as to focus the enforcement on potentially distortive aid, including schemes

5. Possible review of guidelines' scopes So as to increase the predictability of the assessment process and bring them in line with EU 2020; for instance: Risk capital: possible extension to debt finance (combined with equity or alone), and to established innovative and growth-oriented SMEs Environmental aid: coverage of energy infrastructures? R&D&I: better coverage of demonstration projects and R&D infrastructure Broadband: ultra-fast networks (even in urban areas)

6. 2. Key assessment criteria for the analysis of compatibility

7. Key assessment criteria Contributing to common EU objectives and correcting proven market failures State aid should correct the inefficiencies which prevent the market from reaching the objective; or address inequalities Risk capital: Better targeting SME access to finance failure by defining presumed financing gaps specific to each development stage R&D&I: presumption of absence of market failure in cases where a notified project replicates what the market already offers R&R: identify the economic and social damages which could be caused in the absence of aid (value added of the aid) Ensuring an incentive effect Avoid granting aid to activities undertaken in any case Check of counterfactual situation Risk capital: tailoring a public-private investment ratio to each development stage (less private participation in more risky seed stages and more private participation in expansion/growth stages) Limiting the aid to what is necessary Reducing the cost of State aid / By doing so, leveraging private capital Regional aid: covering the costs linked to an investment in the region R&R: "burden sharing" requirements Risk capital: limiting aid to the minimum necessary to attract private capital, not exceeding a fair rate of return

8. Key assessment criteria Defining the appropriate instruments The State aid measure should be an appropriate instrument, either by comparison to non-aid instruments or among several aid instruments Environmental aid: ensuring that the State Aid instrument does not undermine regulatory measures and market mechanisms R&D&I: e.g. reimbursable instrument in case of a liquidity issue at company level; grant instrument where risk/reward profile discourage an investment Preventing distortions in the internal market By protecting competition, combating protectionism and preventing subsidy races, State aid control should ensure a well-functioning internal market, and helps preventing the worsening of discrepancies between Member States Possibility to define a "black list" of types of aid going against Treaty provisions Regional aid: aid for large projects only in "a" regions (in order to avoid subsidy races), more attention to market power / overcapacity issues RDI: e.g. requiring open access and wider dissemination where relevant, in order to alleviate market distortions

9. 3. Revision of the guidelines – first orientations

10. Risk capital guidelines Possible extension to debt finance (combined with equity or alone), and to established innovative and growth-oriented SMEs Better targeting SME access to finance failure by defining presumed equity gaps specific to each development stage (market gaps defined per debt/equity finance and per development stage) Ensuring an incentive effect by tailoring a public-private investment ratio to each development stage (less private participation in more risky seed stages and more private participation in expansion or growth stages)

11. R&D&I guidelines Better coverage of demonstration projects and R&D infrastructure Promote well-designed schemes with high returns for R&D Redirecting R&D towards the areas most in need of public investment (prevent crowding out private investments and disruption of market incentives to innovate) Better targeting of the instrument (e.g. repayable advances for projects close to the market and for liquidity needs) Open access to promote dissemination of knowledge and prevent undue market power

12. Regional aid guidelines Better targeting of aid via new maps Demonstration that aided project is part of a coherent regional development strategy Substantive assessment of all large investment projects Verification of the incentive effect and limitation of the aid to the actual needs Focus aid for large projects towards the least developed areas ("a" regions) Possible identification of structural overcapacities

13. Environmental aid guidelines Possible extension of the scope of the EAG to better reflect the EU 2020 objectives (energy infrastructures, all low carbon sources of energy). Ensuring that the State Aid does not undermine regulatory measures and market mechanisms (evaluation of alternative/complementary instruments; supply obligations for biofuels) Review the need for full compensation of operating costs (e.g. review need for sheltering renewable energy schemes from market evolution) Better ex-ante guidance on the cost calculation for a simpler assessment

14. Broadband guidelines Align the Guidelines with the EU 2020 digital agenda targets: allow aid for ultra-fast networks (even in urban areas) under strong pro-competitive conditions; Introduce the concept of "step change" to avoid crowding out of private investment and to support technologies adequate for low density areas; Increased transparency requirements; Clarification, simplification, ease of administrative burden

15. 4. Conclusion

16. A key pillar of State aid modernisation 1. through the design of measures, ensure that the aid is spent efficiently, and that distortions of competition remain limited Better scoping of guidelines to reflect EU2020 Focus on efficiency of the aid (e.g. limited to the minumum, leveraging private capital) 2. consolidate the approach, focus the enforcement on main distortive aspects of State aid Coherent approach applicable to all categories of aid Prevention of most distortive aid through filters and through reinforced analysis of negative effects 3. provide guidance & clearer rules for national administrations and aid granting authorities Guidance on upfront criteria, and on what needs to be demonstrated