On 25 November 2021, the Commission adopted its revised Communication on the Criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of important projects of common European interest (“IPCEI”). This is particularly relevant for companies who have breakthrough innovative projects and need to seek public support for their projects. For example, under the current Communication, the Commission approved public support to two major research and innovation projects of European interest along the battery value chain for electric vehicles (“summer” and “autumn” projects) and a project in microelectronics. Various other projects are being assessed, for instance on Next Generation Cloud Infrastructure and Services and on green hydrogen.

The revised communication sets out the criteria following which the Commission will approve IPCEI with the State aid rules as of 1 January 2022.

The revision aims to take into account recent EU policies and strategies such as the European Green Deal, the Digital Strategy, the New Industrial Strategy for Europe, the European Strategy for Data and Next Generation EU and to allow larger participation of SMEs and start-ups.

In substance, for a project to be eligible to IPCEI aid, it must:

• represent an important contribution to the Union’s objectives or strategies and have a significant impact on sustainable growth;
• overcome important market or systemic failures not otherwise adequately addressed or remedied;
• involve at least 4 EU Member States and benefit to a wider part of the Union;
• present positive spillover effects beyond the undertakings or sector aided;
• involve important co-financing by the beneficiary;
• comply with the new principle of ‘do no significant harm’ to the environment according to the EU taxonomy.

To be considered as important, the project must fulfil the following criteria:

• R&D&I projects must be of a major innovative nature;
• projects comprising of first industrial deployment must allow for the development of a new product or service with high research and innovation content or the deployment of a fundamentally innovative production process. First industrial deployment means the upscaling of pilot facilities, demonstration plants or of the first-in-kind equipment and facilities, covering the steps after the pilot line, following R&D&I activities, but not mass production or commercial activities;
• infrastructure projects in the environmental, energy, transport, and with the 2021 revision, health and digital sectors, must be of great importance for the environment, climate, energy (including energy security), transport, health, industrial or digital strategies of the Union or contribute significantly to the internal market.

Concretely, the Commission would approve the public funding if it is necessary and proportionate, and if, on the basis of a balancing test, the expected positive effects of the aid in contributing to the objective of common European interest, outweigh its possible negative effect on competition.

The aid is deemed to be necessary if it does not compensate for normal business risk, meaning that without the aid, the realization of the project would be impossible or only possible in a manner restricting the benefits expected from the aided project. This is examined through a counterfactual scenario of absence of aid for instance where there is not any alternative project possible or where there is an alternative project outside the EU. The revised communication stresses that the counterfactual scenario must be credible to be taken into account. The aid is proportionate if it does not exceed the existing funding gap. To avoid any overcompensation where a project turns out to be more profitable than expected, the revised communication allows the Commission to request from the granting authorities to implement a claw-back mechanism. Finally, to prevent the negative undue distortions of competition, the Commission will verify that there is not any less distortive policy instruments or other less distortive types of aid instruments to achieve the same result.

The revised communication makes it easier for Member States to support large, pan-European projects that support environmental objectives. It also makes some openings to projects pursuing industrial policy objectives, for instance to address a strategic dependency, provided that the project relates to a first industrial deployment, following an R&D&I activity and containing itself, that is even after the pilot phase, an important R&D&I component. R&D&I content of an IPCEI project is not defined, but referring to the decisional practice and communication of the Commission in the area of State aid for R&D&I, such content relates to any or a combination of fundamental research, industrial development and experimental development.