State aid: Commission approves €500 million Romanian scheme under Recovery and Resilience Facility to support the establishment of new forest areas

(Source: European Commission)

The European Commission has approved, under EU State aid rules, a €500 million Romanian scheme made available through the Recovery and Resilience Facility (‘RRF’) to support the growth of new forest areas. The measure is part of Romania’s strategy to ensure the protection of forests and biodiversity. The scheme will also contribute to the EU’s strategic objectives relating to the green transition.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The €500 million scheme approved today will enable Romania to establish new forest areas. These forests will contribute to the prevention of erosion and floods, help cleaning the air and combatting climate change. The measure will not only contribute to EU Green Deal objectives, but also support the economic development of rural areas in Romania.”

The Romanian measure

The measure notified by Romania, with a budget of €500 million, will be entirely funded through the RRF, following the Commission’s positive assessment of Romania’s Recovery and Resilience Plan and its adoption by the Council.

The scheme, which will run until 30 June 2026, is aimed at supporting owners of agricultural land suitable for afforestation to establish new forest areas, which will generate a positive climatic impact in the long-term.

Under the scheme, the support will take the form of direct grants to private and public owners of land suitable for afforestation, including municipalities, as well as their associations. In order to benefit from the aid, agricultural land owners must establish forest areas of at least 0.5 ha, or forest belts (i.e. rows of trees and shrubs to protect agricultural land from wind erosion and drought) of an area of at least 0.1 ha. In addition, beneficiaries must ensure that the land on which the forest areas or forest belts are planted is suitable for afforestation. Finally, the afforestation must be carried out in compliance with a project plan approved by the Romanian Forest Guard, detailing the species of trees and shrubs to be planted, as well as the density of the plantations.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, and in particular under the 2014 Guidelines for State aid in the agricultural and forestry sectors and in rural areas and Article 107(3)(c) of the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities under certain conditions.

The Commission found that the scheme:

  • Facilitates the development of certain economic activities, in particular the afforestation of agricultural land. In addition, it has an ‘incentive effect’ as the beneficiaries would not carry out the afforestation activities to the same extent in the absent the aid.
  • Has a limited impact on competition and trade within the EU. In particular:
    • the measure is necessary and appropriate to encourage forest development and to correct a market failure, as the market is not delivering the expected objectives in terms of afforestation;
    • the measure is also proportionate. While the maximum aid is up to 100% of the eligible costs, the final amount will be calculated in a non-discriminatory manner. The eligible costs will be supported by clear, contemporary documentary evidence and based on standard costs.
  • Promotes the achievement of an intelligent and sustainable growth of forests. In addition, the measure is line with rural development objectives and the EU’s strategic objectives relating to the green transition.

On this basis, the Commission approved the measure under EU State aid rules.

Background

All investments and reforms entailing State aid, also those included in national resilience and recovery plans presented in the context of the RRF, must be notified to the Commission for prior approval, unless covered by one of the State aid block-exemption rules.

The Commission assesses measures entailing State aid contained in the national recovery plans presented in the context of the RRF as a matter of priority and has provided guidance and support to Member States in the preparatory phases of the national plans, to facilitate the rapid deployment of the RRF. At the same time, the Commission makes sure in its decision that the applicable State aid rules are complied with, in order to preserve the level playing field in the Single Market and ensure that the RRF funds are used in a way that minimises competition distortions and do not crowd out private investment.

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