I. Introduction 1. The State Aid Guidelines on environmental protection (the “EAG”) are currently subject to a review by the European Commission and are due to be adopted in a new form by 31 December 2014 . The review has opened the floor to taking a critical look at the current rules with a view to bringing them up to speed with market developments, EU political strategies and secondary legislation. 2. The EAG concern two key areas – aid for investments in (and the operation of) renewable energy projects; and – aid in the form of energy tax derogations. 3. State aid in the form of tax derogations is typically introduced to ensure that national energy intensive industry is not too heavily taxed and remains competitive internationally. While this type of aid is important downstream
This article describes the methodology and treatment of investments in renewable energy under the State Aid Guidelines on environmental protection. The Guidelines are currently under an on-going review and a revised version is scheduled for 2014. The current “extra cost” method, which serves to identify eligible costs to which aid can be granted, has remained the same for more than a decade. However, it fails to address the main objective of protecting the environment and leads to arbitrary results. It is put forward that an alternative method, the Net Present Value calculation, is better suited to identify the eligible costs in order to ensure that the aid is calculated on the basis of the specific project and is linked to environmental protection objectives.
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