On August 7, 2023, the German Federal Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz, BMWK) published the Federal Framework for Transformation Technologies (Bundesregelung Transformationstechnologien), which implements the European Union’s (EU’s) state aid framework “Temporary Crisis and Transition Framework (TCTF)” into German law. The Federal Framework allows the German government to support private investment with strategic importance for the transition toward a net-zero economy, in particular support for green transformation technologies in Europe to lessen dependency on imports from non-European countries. The German Federal Framework was approved by the European Commission on July 19, 2023. According to the German ministry, Germany is one of the first EU countries to take advantage of the new TCTF, which was adopted in March 2023.
Content of the Federal Framework
The aid is granted to incentivize investment projects with strategic importance for the transition toward a net-zero economy. In particular, aid is granted to companies for certain projects in Germany for the production of:
- Relevant equipment for the transition toward a net-zero economy, such as batteries, solar panels, or wind turbines; or
- Key components designed and primarily used as direct input for the production of the equipment defined above; or
- The production or recovery of related critical raw materials necessary for the production of the equipment and key components defined above. Aid will be granted until December 31, 2025. Companies that are subject to EU sanctions are excluded. (Federal Framework § 1.)
Aid for private investment is available for all investment costs in tangible assets (such as land, buildings, plant, equipment, machinery) and intangible assets (such as patent rights, licenses, know-how, or other intellectual property) for the production or recovery of the goods mentioned above. It will be granted as direct grants, tax advantages, or subsidized interest rates on new loans or guarantees on new loans. The aid intensity may not exceed 15% of the eligible costs, and the overall aid amount may not exceed 150 million euros (about US$164 million) per company in Germany, with the exception of investments in certain areas designated as “c areas” and “a areas” under the EU Guidelines on Regional State Aid, where the aid intensity may be increased. (§ 2.)
The aid recipient must maintain the investments in the area concerned for at least five years. For small- and medium-sized enterprises (SMEs), the timeframe is shortened to three years. (§ 2, para. 7.)
The German government must inform the European Commission within 60 days from granting the aid about the granting date, the aid amount, the eligible costs, the recipient’s identity, and the type and location of the investment supported. This information is based on information provided by the aid recipient. (§ 4, para. 3.)
Background on the EU’s Temporary Crisis and Transition Framework (TCTF)
The TCTF was first set up in March 2022 to allow EU member states to support their economies without violating EU state aid rules following the aggression against Ukraine by Russia. It was amended in July and October 2022, respectively, to address high energy and gas prices by subsidizing the rollout of renewable energy, storage, and renewable heat. A third revision from March 9, 2023, allows measures to support the transition to a net-zero economy, as explained above.
Jenny Gesley, Law Library of Congress
August 16, 2023
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