European Commission to introduce measures to support the economy in light of Ukraine crisis
14 March 2022
The European Commission has announced several initiatives to support the economy and reduce dependence on Russian gas and oil in the context of Russia's invasion of Ukraine.
In a key development, the European Commission announced on 10 March that it is consulting EU Member States on a proposal for a Temporary Crisis Framework to support the economy, similar to the one introduced in the context of COVID-19.
The Commission indicates that its proposals would allow Member States to:
- grant temporary liquidity support (eg guarantees or subsidised loans) to all companies affected by the current crisis; and
- provide aid (eg grants) in light of the exceptionally high gas and electricity prices. This would be aimed, among others, at energy intensive industries.
The framework will be of particular interest to energy intensive sectors such as cement, iron and steel, paper & pulp and transport.
As with the COVID-19 framework, the measures would be based on Article 107(3)(b) of the EU Treaty, which allows aid to be granted to remedy a serious disturbance in EU economies. The Commission has also reminded Member States that they already have the possibility under Article 107(2)(b) of the EU Treaty to mitigate damage directly caused by the conflict in Ukraine, including certain direct effects of the economic sanctions or other restrictive measures taken in response. This is on the basis that the invasion is an "exceptional occurrence".
The specifics of the framework are to be discussed with Member States, including factors such as the definition of energy intensive users, aid intensities and ceilings, and whether other input costs beyond gas and electricity should be covered. The Commission and the Member States should move quickly to finalise the framework and, as in the context of COVID-19, notified support measures will be assessed under the framework as a matter of high priority.
The Commission's announcement on Thursday follows on from a related announcement on 8 March, in which the Commission set out plans to make Europe independent from Russian fossil fuels well before 2030. This includes plans to diversify gas supplies, speed up the roll-out of renewable gases (eg hydrogen and biomethane) and replace gas in heating and power generation. The Commission suggests this can reduce EU demand for Russian gas by two-thirds before the end of 2022. Russia currently provides over 40% of the EU's gas needs, as well as over 25% of oil imports and 45% of coal imports.
For example, the Commission intends to further develop the regulatory framework to promote a European market for hydrogen and support the development of an integrated gas and hydrogen infrastructure, hydrogen storage facilities and port infrastructure. The Commission says it will assess State aid notifications for hydrogen projects as a priority, for example, completing the assessment of the first Important Projects of Common European Interest on hydrogen within 6 weeks from the submission of a complete State aid notification.
The Commission also envisages a legislative proposal requiring underground gas storage across the EU to be filled up to at least 90% by 1 October each year. In addition, the Commission is considering the possibility of temporary price limits and other measures to advance further investment in the green transition. The Commission has also consulted Member States on amendments to the EU Emissions Trading System State aid guidelines, in particular to expand the list of eligible sectors, while ensuring there are reinforced incentives to improve energy efficiency and/or decarbonise production and limit competition distortions.
We will provide additional details when the State Aid Temporary Framework is published, but if you would like further information in the meantime, please get in touch with one of our partners listed below, or your usual Ashurst contact.
