The European Commission has approved, under EU State aid rules, a €36 million (DKK 268 million) Danish measure aimed at reducing greenhouse gas emissions in the domestic aviation sector. This will be achieved through encouraging the use of sustainable aviation fuel ('SAF') for domestic flights. This is the first State aid scheme approved by the Commission that promotes the use of SAF and represents a significant step towards decarbonising the aviation sector, aligning with both national and EU climate objectives.
The Danish scheme
The scheme is specifically designed to encourage airlines operating in Denmark to use SAF on domestic routes. It will be in place until 31 December 2027. The goal is to support at least one domestic air route using 40% SAF, which is very close to the current technical limit of 50%. This exceeds the minimum set by the ReFuelEU Aviation regulation, which requires fuel suppliers to achieve a minimum share of 2% during the scheme period.
Under the scheme, the aid will take the form of monthly-paid direct grants that will cover the additional costs linked to using SAF compared to conventional kerosene, including costs related to airport infrastructure. The aid level will be determined through a competitive bidding process, ensuring cost-effectiveness and efficiency. The measure will support at least 20 commercial sustainable one-way operations weekly, on one or more domestic routes in Denmark. The scheme includes rules to prevent overcompensation, namely by ensuring that supported SAF is excluded from parallel support measures under the ReFuelEU Aviation regulation and the EU Emissions Trading System (ETS) directive , and by prohibiting the use of SAF that has already received subsidies from Denmark, other EU Member States, or third countries.
The Commission's assessment
The Commission assessed the scheme 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 subject to certain conditions, and the Guidelines on State aid for climate, environmental protection and energy ('CEEAG'), which allow Member States to support measures reducing or removing CO2 emissions.
The Commission found that:
- The scheme is necessary and appropriate to support the reduction of greenhouse gas emissions in the aviation sector in line with national and EU environmental targets.
- The scheme has an incentive effect, as airlines benefitting from the measure would not use SAF to the same extent without the public support.
- The aid has limited impact on competition and trade within the EU. It is proportionate as the aid will be limited to the minimum necessary, given the use of a competitive bidding process. Denmark committed to ensure that the aid delivers overall CO2 reductions and that it does not merely displace emissions from one sector to another.
On this basis, the Commission approved the Danish scheme 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 aid 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 European Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU's objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.
