State aid framework for research and development and innovation (RDI framework)

SUMMARY OF:

Communication on the framework for State aid for research and development and innovation

WHAT IS THE AIM OF THE COMMUNICATION?

The communication sets out the framework the European Commission uses to identify national public support for research, development and innovation (RDI) activities as State aid, and the compatibility criteria it applies to assess State aid for RDI which must be notified to the Commission and cannot be implemented by European Union (EU) Member States before a Commission decision.

In line with the RDI framework, to be compatible with the internal market, the RDI aid must:

• facilitate the development of an economic activity;
• not unduly affect trading conditions to an extent contrary to the common interest.

The aim is to encourage private investments in research, development and innovation which, due to market failures, would not take place without public support.

KEY POINTS

The RDI framework applies to all technologies, industries and sectors. This includes sectors subject to specific EU State aid rules, unless those rules provide otherwise.

The framework distinguishes between non-economic and economic activities of research and knowledge dissemination organisations and research infrastructures, with only the latter activities qualifying as State aid.

In line with the guidance provided in the framework, public funding for non-economic activities does not come under the EU’s State aid rules when these activities include:

• education for more and better skilled human resources;
• independent research and development (R&D) for more knowledge and better understanding, including collaborative R&D where the research and knowledge dissemination organisation or research infrastructure engages in effective collaboration;
• wide dissemination of research results of such activities on a non-exclusive and non-discriminatory basis;
• knowledge transfer activities.

In the RDI framework, the Commission has identified RDI measures for which State aid may, under specific conditions, be compatible with the internal market. These measures are:

• aid for R&D projects (including for feasibility studies);
• aid for the construction and upgrade of research infrastructure;
• aid for the construction and upgrade of testing and experimentation infrastructure;
• aid for innovation activities carried out by SMEs;
• aid for process and organisational innovation; and
• aid for innovation clusters.

Maximum aid intensities (percentage of costs) and eligible costs set out in the RDI framework ensure the aid is proportionate to the market failures it addresses. These are listed, by activity and size of enterprise, in Annex II and recital 95 of the RDI framework, and are based on three criteria:

• closeness of the aid to the market;
• size of the beneficiary; and
• acuteness of any market failure.

Transparency rules require Member States to publish, either in the Commission’s transparency award module or on a national State aid website:

• the text of an individual aid-granting decision;
• information on the beneficiary and aid involved for each award over €100,000.

Member States must:

• carry out an ex post evaluation for every aid scheme of over €150 million in any given year or €750 million in total;
• maintain detailed records of all aid measures for 10 years.

The compatibility test requires the Commission to assess whether the RDI aid facilitates the development of certain economic activities and whether it adversely affects trading conditions to an extent contrary to the common interest.

In its compatibility assessment, carried out under the RDI framework, the Commission will consider the following aspects.

• Under the first condition (that the RDI aid facilitates the development of an economic activity), the Commission will:
  • identify the economic activity supported by the RDI aid;
  • evaluate the incentive effect of the RDI aid – whether the aid encourages additional RDI activity which otherwise would not have taken place or which would be carried out in a restricted manner;
  • consider whether the aid contravenes relevant rules and principles of relevant EU law.
• Under the second condition (that the RDI aid does not unduly affect trading conditions to an extent contrary to the common interest), the Commission will verify:
  • the need for state intervention – that the RDI aid provides a material improvement which the market cannot deliver by itself;
  • the appropriateness of the RDI aid compared with other policy instruments and forms of finance;
  • the proportionality of the RDI aid – that the RDI aid is limited to the minimum amount necessary to meet its objective:
    • the aid can only support eligible costs specified in Annex I to the RDI framework, and
    • the aid may not exceed the maximum aid intensities set out inthe RDI framework and its Annex II;
  • the transparency of the RDI aid;
  • that the negative effects of the RDI aid on competition and trade are minimised or avoided. Among other things, the Commission will look at:
    • the effects of the RDI aid on the product markets (including its potential to distort dynamic incentives, to create or maintain market power, to maintain inefficient market structures, etc),
    • the effect of the aid on trade and location choice, and
    • any manifestly negative effects..

The Commission will balance the identified negative effects of the planned RDI aid on competition and trade against its positive effects.

When carrying out the balancing of negative and positive effects of the RDI aid, the Commission will take into account the RDI aid’s contribution to wider EU policies:

• a new European research area for research and innovation,
• the European Green Deal,
• the European digital strategy, and
• a new industrial strategy for Europe.

FROM WHEN DOES THE COMMUNICATION APPLY?

It has applied since 19 October 2022.

BACKGROUND

• To prevent State aid from distorting or threatening to distort competition in the internal market and affecting trade between Member States, Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) lays down the principle that State aid is prohibited. However, such aid may in certain cases be compatible with the internal market on the basis of Article 107(2) and (3) TFEU.
• The framework contributes to the EU’s strategic objectives of transitioning to a green and digital economy. It is complemented by the general block exemption regulation. This lays down the conditions for State aid which Member States may implement without prior notification to the Commission (see summary).
• The new framework follows an evaluation launched in 2019 as part of the Commission’s State aid fitness check.
• For further information, see:
  • State aid (European Commission).

MAIN DOCUMENT

Communication from the Commission Framework for State aid for research and development and innovation (OJ C 414, 28.10.2022, pp. 1–38).

RELATED DOCUMENTS

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – A new ERA for Research and Innovation (COM(2020) 628 final, 30.9.2020).

Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions – A New Industrial Strategy for Europe (COM(2020) 102 final, 10.3.2020).

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Shaping Europe’s digital future (COM(2020) 67 final, 19.2.2020).

Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions – The European Green Deal (COM(2019) 640 final, 11.12.2019).

Consolidated version of the Treaty on the Functioning of the European Union – Part Three – Union policies and internal actions – Title VII – Common rules on competition, taxation and approximation of laws – Chapter 1 – Rules on competition – Section 2 – Aids granted by States – Article 107 (ex Article 87 TEC) (OJ C 202, 7.6.2016, pp. 91–92).

Consolidated version of the Treaty on the Functioning of the European Union – Part Three – Union policies and internal actions – Title VII – Common rules on competition, taxation and approximation of laws – Chapter 1 – Rules on competition – Section 2 – Aids granted by States – Article 108 (ex Article 88 TEC) (OJ C 202, 7.6.2016, pp. 92–93).

Council Regulation (EU) No 2015/1588 of 13 July 2015 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to certain categories of horizontal State aid (codification) (OJ L 248, 24.9.2015, pp. 1–8).

Successive amendments to Regulation (EU) No 2015/1588 have been incorporated into the original text. This consolidated version is of documentary value only.

Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty (OJ L 187, 26.6.2014, pp. 1–78).

See consolidated version.

Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid (OJ L 352, 24.12.2013, pp. 1–8).

See consolidated version.

last update 07.12.2022