State aid: Commission launches public consultation on measures to improve state aid for innovation

September 22, 2005

Brussels, 21 September 2005

The European Commission is launching consultations on improvements to EU state aid rules as regards projects encouraging innovation, inviting comments from stakeholders before adopting final measures. The suggested improvements include rules for aid that funds innovation, criteria to help public authorities to target aid more effectively, clarifying the rules to increase legal certainty and simplification of the regulatory framework. The proposals for innovation aid cover six broad areas: innovative start-ups; risk capital; the integration of innovation into existing rules on state aid for research and development (R&D); innovation intermediaries; training and mobility between university research personnel and SMEs; and poles of excellence for projects of common European interest.

Competition Commissioner Neelie Kroes said: “Even though effective competition is the best tool to strengthen innovation and competitiveness in Europe, state aid can also play a very useful supporting role. In this consultation document, the Commission sets out for the first time its concrete ideas on ways to support innovation via state aid. It is also the first concrete implementation of the refined economic approach outlined in the State Aid Action Plan.”

With the re-launch of the Lisbon Strategy in February 2005 (see IP/05/130 ), the Barroso Commission has emphasised the need for Member States to create more and better jobs in a more dynamic, innovative and attractive Europe. This is essential to strengthen the European economy while preserving and nurturing the European social and environmental model. In this context, innovation is crucial, and although the situation varies across Member States and across sectors; the EU as a whole does not currently generate sufficient innovation to create enough growth and employment.

The Communication on State Aid for Innovation invites comments on a series of concrete measures for which state aid could be authorised by the Commission through ex-ante rules and criteria. On the basis of the consultation, new provisions will be integrated into the existing state aid rules. These provisions will not only give Member States who apply them more speedy approval of state aid for innovation but also help Member States target public money more effectively.

The Commission makes clear in the consultation that state aid is not the response to all Europe’s competitiveness or innovation problems. For business to embark on a more innovative path it requires, first and foremost, effective competition. Competition creates natural incentives for companies to come up with new ideas and new products; it makes them adapt to change; and sanctions those that stay put or lag behind. Ensuring competition as a driver of innovation is therefore at least as essential as government support.

In line with the refined economic approach laid down in the June 2005 State Aid Action Plan last(see IP/05/680 and MEMO/05/195 ), the Communication on State Aid for Innovation sets out a clear methodology for the elaboration of state aid measures for innovation activities. The principles are that state aid can be authorised when:

1) the aid instrument targets a well-defined market failure

2) state aid is the most appropriate policy instrument (which is not always the case sometimes, structural policies or regulatory action may be more appropriate)

3) the aid has an incentive effect on innovation and is proportionate to the defined objective and

4) distortions of competition are limited.

In the Communication, the Commission identifies a series of market failures that may hamper optimal levels of innovation and looks at how state aid can contribute to changing the incentives to innovate. On that basis, the Communication proposes to authorise aid for two types of innovation-related activities:

a) activities that support risk-taking and experimentation to help bridge the gap between research and the market and

b) activities which improve the general business environment.

The Communication then presents six concrete measures to support innovation via state aid:

1) support for the creation and growth of innovative start-ups (through tax exemptions and subsidies)

2) additional flexibility for state aid to risk capital

3) expanding the scope of current state aid rules for Research and Development and authorising state aid for SMEs engaged in innovation activities (such as commercially-usable prototypes, technological design or feasibility studies)

4) subsidies for SMEs to buy services from innovation intermediaries

5) subsidies for SMEs to recruit highly qualified researchers and engineers and to benefit from exchange of personnel with universities and large companies

6) supporting the development of poles of excellence through collaboration, clustering, and projects of common European interest.

For further information see MEMO/05/333 .
The full text of the Communication is available on: m/competition/state_aid/others/action_plan/

Comments should be sent with the reference “Consultation State aid for Innovation” by email to STATEAIDGREFFE@CEC.EU.INT or by post to: DG Competition, State Aid Greffe, SPA 3, office 6/5, B-1049 Brussels, Belgium.

Item source: IP/05/1169 Date: 21/09/2005 Previous Item Back to Titles Print Item

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