State aid: Commission adopts new state aid Framework for Research, Development and Innovation
European Commission - IP/06/1600 22/11/2006
Brussels, 22nd November 2006
The European Commission has adopted a new Framework to clarify to Member States how best they can give state aid to not only research and development but also innovation projects, without infringing EC Treaty state aid rules. This new Research, Development and Innovation (R&D&I) Framework will help Member States wishing to use state aid as a complementary instrument to boost Research, Development and Innovation. The Framework sets out a series of guidelines for specific types of state aid measures – such as aid for R&D projects, aid to young innovative enterprises and aid to innovation clusters – that could encourage additional R&D&I investments by private firms, thus stimulating growth and employment and improving Europe’s competitiveness. These guidelines allow individual Member States to tailor aid measures to particular situations, subject to the overall test that the aid must address a defined market failure, must be well designed and that the identified benefits must outweigh the distortions to competition resulting from the aid. The new Framework is due to apply from 1st January 2007.
EU Competition Commissioner Neelie Kroes said: “Thanks to the Commission’s new R&D&I Framework, Member States should find it easier to use state aid to boost private sector R&D and innovation projects. The Framework is an important contribution to the Strategy for Growth and Jobs. It is now up to Member States to take full advantage of this opportunity.”
European companies must invest more in research, development and innovation (R&D&I) if they are to compete globally. The most important way to stimulate innovation is by fostering effective competition. Competition in free and open markets pushes firms to innovate, as this is a way for them to improve and differentiate their products, increase their appeal to customers and thereby survive competitive pressures. However, there are situations where markets on their own fail to ensure optimum levels of R&D&I and where state aid may be needed.
On that basis, the primary objective of the new Framework for R&D&I is twofold:
Under the Framework, Member States will still be obliged to notify aid measures to the Commission for verification and authorisation, but if the measures have been drawn up in accordance with the guidelines authorisation will be faster.
Three part test
The new framework for R&D&I is based on the refined economic approach developed in the State Aid Action Plan (SAAP, see IP/05/680) and in the Communication on State Aid for Innovation (see IP/05/1169). Whereas the current Framework is limited to aid for R&D, the new Framework also includes aid for innovation projects. It explains that a state aid measure for R&D&I will be authorised on the basis of a three-part test:
The Framework outlines the main market failures hampering R&D and innovation: knowledge spill-overs, imperfect and asymmetric information, coordination and network failures. It then gives guidance on a series of types of state aid measures that can address these market failures without excessively distorting competition and trade.
Member States can tailor this package to support R&D&I according to their national preferences, needs and specificities. The Framework indicates to Member States how they can use the following types of measures in conformity with the state aid rules:
The new Framework also aims at improving the Commission’s control of state aid, by allowing it to focus on the cases most likely to give rise to distortions of competition. As a result, it introduces a detailed assessment for cases involving high aid amounts, with a consequent higher risk for competition and trade.
State aid is in principle prohibited by the EC Treaty unless it is authorised by the European Commission. The Commission issues guidelines and frameworks to facilitate the work of Member States by announcing in advance which measures it will consider compatible with the common market, thus speeding up their authorisation.
For further details, see MEMO/06/441.
The Commission has also adopted today a Communication on the more effective
use of tax incentives in favour of R&D (see IP/06/1598).