On 29 April 2026, the European Commission (“Commission”) adopted its Communication establishing the “Middle East Crisis Temporary State Aid Framework” (“METSAF”). The Communication introduces a new State aid framework to mitigate the consequences of the energy price spikes and supply chain disruptions caused by the ongoing hostilities in Iran and the wider region, and the closure of the Strait of Hormuz (the “Middle East Crisis”). The framework applies from 1 March 2026 to 31 December 2026.
Key takeaways
- The METSAF is a temporary instrument that makes State aid rules more flexible with the aim of counterbalancing the ongoing energy price spikes due to the Middle East Crisis.
- Under the METSAF, Member States may exceptionally seek the Commission’s approval to partially compensate companies active in the land transport (rail, road and inland waterways), intra-EU short sea shipping services, agriculture, fisheries and aquaculture sectors to cover extra-costs of fuel or fertilisers incurred due to the Middle East Crisis.
- Additionally, the METSAF allows Member States to increase the aid intensity of electricity price relief schemes for energy-intensive users under the Clean Industrial Deal State Aid Framework (“CISAF”) (see our previous blog).
Temporary instrument to address energy price spikes due to the crisis
In principle, State support to alleviate energy prices is prohibited or accepted only under very strict conditions because it is typically very distortive of competition. Energy is regarded as a normal expense of a company. However, under the METSAF, the Commission will exceptionally authorise such aid to counterbalance the negative economic effects of the Middle East crisis.
A similar measure was allowed under the Temporary Crisis Framework following the aggression against Ukraine by Russia (“TCF”). The TCF allowed Member States to grant aid for additional costs incurred due to exceptionally severe increases in natural gas and electricity prices. The TCF was implemented on an emergency legal basis to remedy a serious disturbance in the economy of Member States. By contrast, the METSAF is based on a general exception to the prohibition of aid. This means that the Commission seeks to prevent a serious disturbance that has not yet materialised, reflecting the Commission’s willingness to push State aid law boundaries to preserve the EU economy.
Partial compensation of fuel or fertilisers’ extra costs incurred due to the Middle East Crisis
Under certain conditions, Member States can now cover part of the extra-costs of fuel and fertilisers caused by the Middle East Crisis, in sectors considered by the Commission to be the most exposed: agriculture, fisheries and aquaculture, land transport (rail, road and inland waterways) and intra-EU short sea shipping services.
To be acceptable under the METSAF, aid can only cover part of companies’ fuel costs or, in the agricultural sector, fertilisers costs, which have been exceptionally increased as a result of the crisis. Aid may not directly cover EU Emission Trading System (“ETS”) costs, which are derived from the purchase of emissions allowances or from emissions reduction measures.
As a general principle under the METSAF, aid must be based on a scheme, available to any company meeting the eligibility criteria. It can take the form of a direct grant, tax or payment advantage, or other forms (like guarantees, loans and equity). If the aid takes the form of a direct grant, tax or payment advantage, it may cover up to 70% of the extra-costs for fuel. The relevant market benchmark price for fuel or fertiliser is the applicable historical benchmark price identified by the Member State, based on reasonable assumptions and recognised indices. The aid can also take the form of a repayable instrument, such as guarantees or loans. In this case, unless it contains a conversion option into other forms of aid, such as grants, the METSAF may even cover up to 100% of the extra-costs.
The aid can be granted for the eligible period between 1 March 2026 and 31 December 2026. The METSAF can have a retroactive effect, as it applies to aid granted before its adoption and it can cover extra-costs incurred from 1 March 2026 (see for instance, Case SA.123451, Croatia – State aid for compensation to the fisheries sector).
Increased compensation for energy-intensive users
The Commission continues to promote the transition towards clean and renewable energy as established in the CISAF. Given the significant increase in energy prices, the Commission considered it necessary to temporarily amend the CISAF to introduce further flexibility. These amendments will allow Member States to grant increased aid to energy-intensive users.
The CISAF already allowed the granting of aid in the form of price relief to companies that operate in certain energy-intensive activities presenting a risk of moving outside the EU to locations with less strict environmental regulations (see our blog). These include companies engaged in mining, agriculture, textiles, and manufacturing, among other activities (see the full list here).
The METSAF goes one step further by raising – until 31 December 2026 – the ceiling of the amounts of aid that can be received by those companies to cover the cost of electricity. Under the METSAF, instead of 50% previously established, aid can cover up to 70% of the yearly average wholesale market price in the bidding zone to which the beneficiary is connected, for not more than 50% of their annual electricity consumption.
The METSAF also increases the total amount of aid that can be cumulated between the aid granted under the CISAF and under the ETS Guidelines to cover indirect emission costs, i.e., costs incurred from the emission of greenhouse gases that are passed on in electricity prices. Under the CISAF, the cumulation was limited to the highest amount applicable under any of the two guidelines. The METSAF allows the combined amount of aid to increase up to the whole amount permitted under the ETS Guidelines plus 50% of the aid permitted under the CISAF.