The European Commission has approved, under EU State aid rules, a €260 million Belgian measure in favour of Air Liquide Large Industry NV ('Air Liquide') and BASF Antwerpen NV ('BASF') for a carbon capture and storage ('CCS') project, Kairos@C. The measure will contribute to Belgium's climate targets by decarbonising the industry through an integrated cross-border CCS value chain, in line with the objectives of the Clean Industrial Deal .
The Belgian measure
Belgium notified to the Commission a €260 million measure to support the Kairos@C project, a joint CCS project by the two beneficiaries, Air Liquide and BASF.
The project aims at capturing greenhouse gas ('GHG') emissions from the companies' existing plants, located in Antwerp, that produce hydrogen, ammonia and ethylene oxide. The CO2 captured will be transported to a permanent underground storage site in the North Sea. The project aims to create an integrated, cross-border CCS value chain at industrial scale, which will result in around 20 million tonnes of net GHG emissions avoided, over 15 years. This innovative project will allow the beneficiaries to produce low-carbon hydrogen and low-carbon ammonia.
The Kairos@C project is a laureate of the first large-scale Innovation Fund call of 2020 and was awarded a grant of over €365 million. However, due to, among others, exceptional inflation over the past years, the project costs have significantly increased and as a result it could not start without additional aid.
The measure will be financed through the budget of the Flemish region. The aid will take the form of a direct investment grant of €30 million per beneficiary, which will be complemented by an additional grant that will be paid out in ten annual instalments of €10 million per beneficiary, provided that minimum GHG emission reductions are achieved.
The Commission's assessment
The Commission assessed the Belgian measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU ('TFEU'), which enables Member States to support the development of certain economic activities under certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy ('CEEAG').
In particular, the Commission found that:
- The measure facilitates the development of an economic activity. In particular the capture, collection and storage of CO2, as well as the decarbonisation of the production process of ammonia, ethylene oxide and hydrogen;
- The aid has an 'incentive effect', as the beneficiaries would not carry out the relevant investments without the public support;
- The aid is necessary and appropriate to promote environmental protection in the targeted economic activities. In addition, it is proportionate, as it is limited to the minimum necessary and does not lead to overcompensation;
- The measure has sufficient safeguards to ensure that undue distortions of competition are limited. The aid does not alter the production capacity of the beneficiaries, and if the project generates extra net revenues, the beneficiaries will return to Belgium part of the aid received. The beneficiaries will also disseminate the technical know-how gained through the project;
- The aid will bring about positive effects that outweigh any potential distortion of competition and trade in the EU.
On this basis, the Commission approved the Belgian measure under EU State aid rules.
Background
The 2022 CEEAG provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy measures which are subject to the notification requirement under Article 107(3)(c) TFEU.
The guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Clean Industrial Deal objectives in a targeted and cost-effective manner. The rules align with recent regulatory changes in the energy and environmental areas, and cater for the increased importance of climate protection. They include sections on aid for renewable energy, energy efficiency measures, aid for clean mobility, infrastructure, circular economy, pollution reduction, protection and restoration of biodiversity, aid for the closure of power plants using coal as well as measures to ensure security of energy supply, subject to certain conditions.
The Innovation Fund is an EU funding programme for the demonstration of innovative low-carbon technologies. During the first Innovation Fund call for large-scale projects, seven projects, including the Kairos@C project, were selected for funding, covering a wide range of sectors to decarbonise various parts of Europe's industry and energy sectors.
