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IP/05/1543

Brussels, 7th December 2005

State aid: Commission opens investigation into UK scheme to support paper production from waste paper

The European Commission has opened an in-depth investigation under EC Treaty state aid rules into a proposed UK scheme granting aid to paper mills to increase printing and writing (P&W) paper production capacity and to stimulate the demand for collection of waste paper from offices. The Commission recognises the environmental benefit of recycling waste paper, but it has doubts whether the use of recycled fibre for the production of P&W paper goes beyond the “state of the art” in the industry. The Commission’s decision to investigate will shortly be published in the EU’s Official Journal and interested parties will be able to comment on the UK’s proposed measures. The Commission will then take a final decision on the compatibility of the scheme with EU state aid rules. The launch of the inquiry does not prejudge the Commission’s final decision.

Competition Commissioner Neelie Kroes commented: “We must ensure that aid proposed on environmental grounds genuinely pursues environmental objectives and is limited to what is necessary to reach the objectives without undue distortion of competition in the marketplace.”

The Waste and Resources Action Programme (WRAP), is a UK Government body responsible for encouraging recycling activities. WRAP will tender grants among paper mills to co-finance capacity increases for the manufacturing of P&W paper using waste P&W paper. The waste paper will mostly be collected from offices. The budget of the scheme is between £6 and £20 million (€8.7 and €29.2 million).

The Commission has doubts that the use of P&W waste paper for the production of P&W paper goes beyond the “state of the art” as waste paper is commonly used as the cheapest raw material in paper industry. Given the expected increase in the collection of waste P&W paper and the growing interest of the paper industry in this type of waste paper the Commission doubts the necessity of the aid

Furthermore, the methodology used by the UK to calculate the costs eligible for state aid does not seem to restrict the aid to what is strictly necessary to meet the environmental objectives. In particular, the costs of a technically comparable investment that does not provide the same degree of environmental protection have not been deducted from the eligible costs.

Interested parties are invited to submit their comments, in particular as regards:

  • what should be considered to be the “state of the art” in the paper industry when using P&W waste paper in the production of P&W paper
  • the necessity of the aid in the light of the expected rise in collection rates of waste P&W paper and
  • the degree of distortion of competition to be expected, both in the markets for new paper and for waste

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