State aid in the agriculture sector

The European Commission has adopted new guidelines on state aid in the agriculture and forestry sector for the period 2007-13. They establish a series of rules applicable to notified aid to supplement the exemption Regulation (EC) No 1857/2006.

ACT

Community guidelines for state aid in the agriculture and forestry sector 2007-13 [Official Journal C 319 of 27.12.2006].

SUMMARY

The guidelines cover state aid in the agriculture and forestry sector for the period 2007-13 and replace the previous guidelines (2000-06) established for agriculture.

These guidelines apply to state aid granted for the production, processing and marketing of agricultural products. Annex I of the Treaty on the Functioning of the European Union (TFEU) provides a detailed list of the agricultural products included. They do not apply to the fisheries and aquaculture sector but, unlike the previous ones (2000-06), are applicable for aid for some forestry activities.

European Union (EU) countries are still obliged to notify the Commission of state aid for certain Annex I products that are not covered by a common market organisation (CMO), but the Commission may only make observations on the aid schemes. EU countries are invited to take on board these observations to avoid the risk of infringement procedures.

State aid is categorised in the guidelines as follows:

• rural development measures;
• aid for risk and crisis management;
• other types of aid;
• aid for the forestry sector.

RURAL DEVELOPMENT MEASURES

In line with Regulation (EC) No 1698/2005, which regulates EU support for rural development (the second pillar of the Common Agricultural Policy (CAP)), the guidelines set out the rules governing state aid for rural development measures or other closely related measures.

Aid may be authorised for investment in agricultural holdings in the following cases:

• aid for investment in agricultural holdings proper;
• aid for the conservation of traditional landscapes and buildings;
• aid to relocate farm buildings where this is done in the public interest;
• aid for necessary investment to improve the environment, hygiene conditions and animal welfare;
• aid for additional costs due to investment made in EU countries to implement Directive 91/676/EEC;
• aid for investment in compliance with applicable EU or national rules (only for additional costs incurred by young farmers to implement the rules within 36 months of their establishment).

Aid for investment in connection with the processing and marketing of agricultural products is authorised where it meets the conditions laid down in one of the following provisions:

• Commission Regulation (EC) No 800/2008;
• the Commission guidelines on national regional aid for 2007–13.

Environmental and animal welfare aid must meet the general objectives of EU environmental policy. This consists of the precautionary principle and the principles that preventive action should be taken, that as a priority environmental damage should be rectified at source and that the polluter should pay.

Aid to compensate for handicaps in certain areas must contribute to maintaining land use for agriculture, conserving rural areas and maintaining and promoting sustainable farming systems. To qualify for this aid, EU countries must demonstrate the handicaps in question and provide proof that the amount of aid avoids any overcompensation of these handicaps. The level of compensatory payments must be proportionate to the economic impact of the handicaps. Only the economic impact of permanent handicaps that lie outside human control may be taken into account for calculating the amount of compensatory payments.

Aid for meeting standards is designed to cover part of the costs incurred and loss of income as a result of applying standards in the fields of environmental protection, public health, animal and plant health, animal welfare and occupational safety.

Aid for the setting up of young farmers is for persons under 40 years of age who are setting up an agricultural holding for the first time as farm manager. Eligible beneficiaries may also submit a plan to develop their agricultural activities.

Aid for early retirement or for the cessation of farming activities is authorised subject to the conditions for permanent and definitive cessation of commercial farming activities.

Aid for producer groups aims to encourage the establishment of producer groups to concentrate their supply and adapt their production to market requirements. This aid is limited to small and medium-sized enterprises (SMEs). Eligible expenditure includes: rental of suitable premises, purchase of office equipment, including computer hardware and software, administrative costs (including staff), overheads and other expenses.

Aid for land reparcelling aims to support the exchange of plots of agricultural land and to facilitate the establishment of economically viable holdings. Aid may only be granted to cover the legal and administrative expenses involved in reparcelling up to 100 % of actual expenditure incurred.

Aid to encourage the production and marketing of quality agricultural products aims to improve the quality of agricultural products and to encourage farmers to participate in food quality schemes.

Under technical support in the agricultural sector, aid may be granted for the following measures:

• education and training provided to farmers and agricultural workers;
• replacement services to cover farmers' absence due to holiday or sickness;
• consultancy services provided by third parties;
• organisation of forums to pool knowledge between enterprises and organisation of and participation in competitions, exhibitions or fairs;
• publication of factual or scientific data;
• publications.

Aid in the livestock sector targets support for the maintenance and improvement of the genetic quality of EU livestock.

Aid for the outermost regions and the Aegean islands aimed at meeting the needs of these regions will be examined by the Commission on a case by case basis, in accordance with the specific legal provisions applying to these regions, and with regard to the compatibility of the measures concerned with rural development programmes for the regions concerned.

RISK AND CRISIS MANAGEMENT

State aid may be granted to manage crises in the sector of primary agricultural production. However, distortions of competition must be avoided as far as possible. Requiring a minimum contribution from producers to losses or the cost of such measures provides an incentive for minimising risk. The following risk and crisis management measures are eligible for state aid:

• aid to compensate for damage to agricultural production or the means of agricultural production;
• aid regarding TSE (transmissible spongiform encephalopathies) and fallen stock;
• aid towards the payment of insurance premiums;
• aid for closing production, processing and marketing capacity.

Aid for rescuing and restructuring firms in difficulty will be assessed in accordance with the applicable EU guidelines on state aid for rescuing and restructuring firms in difficulty.

OTHER TYPES OF AID

Regulation (EC) No 800/2008 provides certain conditions under which aid for employment and aid for research and development are authorised.

There are horizontal aid instruments applicable to the agriculture sector. State aid for the agriculture sector is also covered by more general rules on the compatibility of aid with the TFEU, such as training aid (which is also covered by Regulation (EC) No 800/2008), state aid in connection with investment capital, state aid in the form of guarantees and state aid in the form of public service compensation.

Aid for advertising agricultural products may be authorised if the advertising campaign is centred on quality products – recognised EU designations (such as registered designation of origin – protected designation of origin (PDO) and protected geographical indication (PGI)) or for national or regional quality labels. Advertising campaigns must not be dedicated directly to the products of one or more particular company or companies.

Aid linked to tax exemptions under Directive 2003/96/EC may be granted by applying reduced or zero rates of taxation, provided that no differentiation is made in the agricultural sector. This covers products used as fuel for primary agricultural production or energy and electricity products used for primary agricultural production.

Aid in the form of subsidised short-term loans is no longer authorised.

AID FOR THE FORESTRY SECTOR

Up to now there have not been any specific EU rules governing state aid for the forestry sector. Aid could be granted under EU general rules for all sectors or under certain specific regulations. In the interests of transparency, the Commission has therefore sought to more clearly define EU policy on state aid for the forestry sector. However, the guidelines apply only to living trees and their natural environment in forests and other wooded land. They do not apply to state aid for forest-based industries, timber transport, wood processing or other forestry resources used as products or for the purpose of energy generation.

Aid in the forestry sector is authorised for the following purposes:

• to contribute directly towards maintaining and enhancing the ecological, protective and recreational functions of forests, local biodiversity and a healthy forest ecosystem;
• afforestation of agricultural and non-agricultural land, establishment of agri-forestry systems on agricultural land, Natura 2000 payments, payments for the forestry environment, restoring forest potential, introducing prevention systems, and non-productive investments;
• to cover additional costs and loss of revenue linked to using more demanding environmentally friendly forestry techniques than those imposed by the rules, if the owners concerned undertake voluntarily to use these techniques and this commitment meets certain conditions;
• to purchase forestry land, provided that the intensity of aid is within the limits set for aid for investment in agricultural holdings;
• training for forestry owners and workers and for consultancy services provided by third parties;
• setting up forestry associations;
• support for initiatives to spread new techniques, pilot or demonstration projects under the conditions laid down in the chapter on technical assistance in the agricultural sector in the guidelines.

PROCEDURES

All new aid schemes and all new aid must be notified to the Commission before they are implemented, unless the aid is covered by one of the exemption regulations adopted by the Commission. In contrast to the guidelines for 2000-06, only aid schemes of limited duration are now authorised, with the maximum duration being seven years. These new guidelines apply from 1 January 2007.

EU countries must submit annual reports and the Commission reserves the right to request additional information.

These guidelines apply until 31 December 2013. However, the Commission reserves the right to amend them in the light of important considerations of competition policy, agricultural policy, human and animal health or in order to take account of other EU policies or international commitments.

BACKGROUND

The new guidelines form part of the 2003 reform of the CAP, which confirms the importance of rural development and shows the Commission's concern to make aid granted by EU countries in the agriculture sector more coherent. The guidelines for the period 2007-13 are based on Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development, and in particular Articles 88 and 89 thereof, which contain specific provisions regarding state aid.

Last updated: 12.09.2011