EUROPEAN COMMISSION. The Commission has based its Decision on the following considerations:

Transcription

1 EUROPEAN COMMISSION Brussels, C(2017) 1485 final Subject: State aid Germany SA (2016/N) Bund: Forest climate fund Sir, The European Commission ("the Commission") wishes to inform Germany that, having examined the information supplied by your authorities on the State aid scheme referred to above, it has decided not to raise any objections to the scheme falling under the scope of this decision (as detailed in recital (15)), as it is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty on the Functioning of the European Union ("TFEU"). The Commission has based its Decision on the following considerations: 1. PROCEDURE (1) By letter of 2 May 2016, registered by the Commission on the same day, Germany notified, according to Article 108(3) TFEU, the above mentioned aid scheme. The Commission sent a request for additional information to the German authorities on 5 July 2016 which the German authorities provided by letter of 15 July 2016, registered by the Commission on the same day. The Commission sent a second request for additional information to the German authorities on 25 August 2016 which the German authorities provided by letter of 2 September 2016, registered by the Commission on the same day. The Commission sent a third request for additional information to the German authorities on 28 October 2016 which the German authorities provided by letter of 19 December 2016, registered by the Commission on the same day. The Commission sent a fourth request for additional information to the German authorities on 9 February 2017 which the German authorities provided by letter of 15 February 2017, registered by the Commission on the same day. His Excellency Dr. Frank-Walter Steinmeier Bundesminister des Auswärtigen Werderscher Markt Berlin DEUTSCHLAND Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË

2 2. DESCRIPTION 2.1. Title (2) Aid scheme for the preservation and development of the CO2-reduction potential of forests and wood and adaptation of forests to climate change through the Forest climate fund Objective (3) Germany intends to provide payments in order to support the adaptation of forests to climate change and to maintain and increase CO2-sequestration by forests. The notified scheme is not part of any rural development programme Legal basis (4) The legal basis is the draft Directive on aid measures (hereinafter: "the notified measure") for the preservation and development of the CO2-reduction potential of forests and wood and adaptation of forests to climate change (Forest climate fund aid directive). (Richtlinie zur Förderung von Maßnahmen zum Erhalt und Ausbau des CO2-Minderungspotenzials von Wald und Holz sowie zur Anpassung der Wälder an den Klimawandel (Förderrichtlinie Waldklimafonds).) 2.4. Duration (5) From the date of adoption of the Commission Decision until 30 June Since the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 ("the Guidelines") 1 are applicable until 31 December 2020 only, the German authorities took a commitment to align, if needed, the present notified aid scheme with the new Guidelines applicable beyond that date Budget (6) The overall budget is EUR 125 million Beneficiaries (7) This scheme foresees different categories of beneficiaries, depending on the submeasure in question. (8) The beneficiaries of sub-measure II.1.d can be natural or legal persons governed by private or public law, as well as their associations including forestry associations recognised under the Federal Forest Law (Bundeswaldgesetz). (9) The beneficiaries of sub-measure II.2.c can be landholders, whether they are natural or legal persons governed by private or public law, as well as their associations including forestry associations recognised under the Federal Forest Law (Bundeswaldgesetz). 1 OJ C 204, , p. 1. as last modified by OJ C 390, , p. 4. 2

3 (10) The beneficiaries of all other sub-measures can be natural or legal persons governed by private or public law, as well as their associations including forestry associations recognised under the Federal Forest Law (Bundeswaldgesetz), active in the forestry sector. (11) The number of beneficiaries is expected to be between 101 and 500, including all sizes of undertakings. (12) Undertakings in difficulty as defined in point 35(15) of the Guidelines are excluded from the scope of beneficiaries. (13) Undertakings which are subject to an outstanding recovery order following a previous Commission Decision declaring an aid illegal and incompatible with the internal market are excluded from the scope of the beneficiaries Aid instrument (14) Direct grant 2.8. Description of the aid scheme (15) Germany has set up several sub-measures in order to support the adaptation of forests to climate change (Chapter II.1 of the notified measure) and to maintain and increase CO2-sequestration by forests (Chapter II.2 of the notified measure). Those sub-measures are described in the notified measure referred to in recital (4) and summarised below. Only certain sub-measures in Chapters II.1 and II.2 of that act are part of this notification; the other sub-measures fall under Commission Regulation (EU) No 651/ and under Commission Regulation (EU) No 702/ and, therefore, shall be granted as block exempted aid or as de minimis aid under Commission Regulation (EU) No 1407/ (16) Some of these sub-measures could be financed under the rural development programme in order to achieve the goals set in Sections 2.1 to 2.7 of Part II of the Guidelines. However, given the division of competences between the Federal Government and the Länder, it is not feasible to integrate in a horizontal crosscutting manner the Forest climate fund into the States' programmes, without losing the benefits of having a central national approach for the Forest climate fund. These sub-measures of the forest climate fund respect all relevant goals and objectives of the EAFRD are therefore consistent with relevant rural development programs. Other sub-measures, such as the reestablishment of a balanced hydrological regime, could not be financed under the rural development Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty Text with EEA relevance, OJ L 187, , p. 1. Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union, OJ L 193, , p. 1. Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid Text with EEA relevance, OJ L 352, , p. 1. 3

4 programme, and therefore have to be granted in accordance with Section 2.8 of Part II of the Guidelines. (17) The German authorities have confirmed that no other potentially less distortive forms of aid currently exist. The proposed measures are targeted at adjusting the long development cycles of forest ecosystems. The main goal is not an economic use, but rather climate protection and adaptation of forests to climate change, with particular attention being paid to environmental considerations. It is therefore not possible to achieve the objectives of these measures with less distortive forms of aid, such as repayable advances or interest rebates. (18) The German authorities have confirmed that regarding large enterprises, the aid amount corresponds to the net extra costs of implementing the investment in the area concerned, compared to the counterfactual scenario in the absence of aid. The method explained in point (96) of the Guidelines will be used together with maximum aid intensities as a cap. (19) The German authorities have also confirmed that no aid may be granted under Section 2.8 of the Guidelines to forest based industries or for commercially viable extraction of timber or for transportation of timber or the processing of wood or other forestry resources into products or for energy generation, and no aid may be granted for felling the primary purpose of which is the commercially viable extraction of timber or for restocking where the felled trees are replaced by equivalent ones. (20) The German authorities have demonstrated that sub-measures II.1.a and II.1.b, falling under Section of the Guidelines do not reduce biodiversity, cause nutrient leaching or adversely affect natural water ecosystems or water protection zones The sub-measures of Chapter II.1 of the notified measure (21) The objectives of the sub-measures of Chapter II.1 are to increase the adaptability of forests to climate change, to preserve their functions in particular for biodiversity and as a CO2 sink, as well as to ensure the CO2-sequestration of forests and wood products. (22) Sub-measure II.1.a concerns the reestablishment of a balanced hydrological regime typical for the given natural environment, for example by securing or raising the water table, increasing the water retention potential of forest soils together with their CO2 retention capacity, or by reducing/delaying the run-off. (23) Sub-measure II.1.b concerns the protection, conservation and restoration of peatland in forests and moorland forests. (24) Sub-measure II.1.c concerns the restoration, regeneration and planting of new natural or naturally managed riparian and humid forests. This includes for example the dismantling of drainage facilities, the construction of facilities for semi-natural water retention, and planting for the restoration of moorland, riparian and humid forests. (25) Sub-measure II.1.d concerns the investment costs of the establishment of different reference areas under permanent natural forest development for targeted research into the adaptive capacity of forest ecosystems and their CO2-balance 4

5 including their forest soils, as well as the conservation and development of forest genetic resources of the network if, taking into account existing reference areas, further needs arise. The reference areas shall be representative for the area-wise most significant forest types and forest development phases (including forest areas with a high proportion of old growth and deadwood) in Germany. (26) Sub-measure II.1.e concerns the conservation and development of forest genetic resources and biodiversity as a basis of the adaptability of forests. This includes conservation stands for tree and shrub species; necessary maintenance measures in designated gene conservation stands, authorised seed stands as well as in stands mixed with rare tree species; additional planting using local propagation material to enhance individuals of rare tree species with a low occurrence with the objective of restoring a viable population and interconnecting isolated populations and biotopes; the setting-up and development of networking structures to ensure genetic diversity The sub-measures of Chapter II.2 of the notified measure (27) The objectives of the sub-measures of Chapter II.2 are to maintain and increase CO2-sequestration by forests and the avoidance of greenhouse gas emissions. These include the following model projects of climate action. (28) Sub-measure II.2.a concerns the development of preventive measures to avoid and manage large-scale damages. It includes the development of concepts for inter-company storage infrastructure (forest contingency plan infrastructure), as well as knowledge collection and method development (e.g. emergency plans, reforestation strategies, longer-term wood storage, logistic concepts) and concepts pertaining to mitigating climatic risks of forest holdings (construction/maintenance of firebreaks, fire water ponds, forest fire monitoring facilities); support for investments is excluded. (29) Sub-measure II.2.b concerns the implementation of the newly developed preventive forest protection measures to prevent and mitigate climate-related area damaging events. (30) Sub-measure II.2.c concerns the planting of new mixed forests (afforestation) on any type of land, with the aim of ensuring an optimal CO2-sequestration (criterion: growth/hectare) and having a good substitution potential, taking into account more adaptive, more suited to the location, preferably mainly naturally occurring tree species; and the targeted creation of pioneer forests with appropriate pioneer tree species, in areas where afforestation is made difficult by severe pedo-climatic conditions. This includes sowing, planting and measures for the guided succession of cultures, including preparation of the culture, its protection, surveys, such as location surveys for the preparation of the measure; rectifications, where the forest owner is not responsible for the failure, Moreover, no aid shall be granted for the planting of trees for short rotation coppicing, Christmas trees or fast growing trees for energy production. The species planted shall be adapted to the environmental and climatic conditions of the area and comply with specific minimum environmental requirements. In addition, the German authorities took a commitment to comply with the minimum environmental requirements of point 509 of the Guidelines, and have defined a threshold (20 ha) referred to in point (509)(d). An annual premium will be granted as de minimis aid under Commission Regulation (EU) No 1407/2013. However, 5

6 aid for afforestation of land owned by public authorities or for fast growing trees covers only the costs of establishment. In the case of state-owned land, aid can be granted if the body managing such land is a private body of municipality Eligible costs (31) The aid will be granted to commercial enterprises (Unternehmen der gewerblichen Wirtschaft) on a cost basis, otherwise on an expenditure basis calculation. (32) The eligible costs under cost-based support are the following: (a) (b) (c) (d) (e) Personnel costs for staff assigned to the project, based on the standard costs calculated by the association Kuratorium für Waldarbeit und Forsttechnik; Costs of instruments and equipment to the extent and for the period used for the project. Only the depreciation costs corresponding to the life of the demonstration project, as calculated on the basis of generally accepted accounting principles are considered as eligible. Costs of contracts with third parties (in particular planning services and the implementation of procedures, evaluation, scientific advice); Other operating expenses (e.g. costs of materials, supplies and similar products) incurred directly as a result of the project; As regards the lease and purchase of immovable property, priority should be given to examining whether a voluntary land exchange, a compensation payment or an indemnity payment is possible. The eligible costs are the following: construction, acquisition, including leasing, or improvement of immovable property, with land purchased only being eligible to an extent not exceeding 10% of the total eligible costs of the operation concerned. As a last resort, in exceptional and duly justified cases related to the measures described in recitals (22) to (26), that percentage may be increased to 100% for operations concerning environmental conservation if the acquisition of land is absolutely necessary to achieve the objectives of the support. Such exceptional cases shall fulfil all of the following criteria which determine the achievement of the purpose of the support, in order to ensure that the objectives of the support are legally achieved and maintained in rem: The recognised high ecological value or potential of the area (in order to ensure that the professional purpose of the support is achieved); Long-term real guarantees that the objectives of the aid are met (in order to ensure that the purpose of the support is secured in the long run in rem); The exclusion of building in the area (in order to ensure that the technical purpose of the support is achieved); 6

7 The re-sale of land that an individual beneficiary acquired thanks to the support given in this framework is not allowed; The exclusion of an economic activity of the beneficiary (in order to ensure that the support does not provide financial gains); and (33) A take-over declaration of all land-related costs after the end of the project period by the beneficiary (in order to ensure that the purpose of the support is secured in the long run).as regards recital (32), there is no differentiation in the maximum percentage that land costs may reach in the different exceptional cases, as the number of such cases is very low and each of them have to be assessed individually, whether they are appropriate, necessary and reasonable in order to serve the purpose of the support. (34) For expenditure-based support, the rules of cost-based support apply accordingly, with the following exceptions: (a) (b) expenditure for personnel is only eligible for additional personnel that is necessary for the project; and basic equipment (forestry equipment of general use) and overheads are not eligible for expenditure-based support Ineligible costs; ineligible projects and activities (35) The following costs are not eligible for aid: (a) (b) (c) Costs and expenditure incurred before the application is submitted; Operating costs and operating expenditure which are not directly attributable to the project; VAT. (36) The following projects and activities are not eligible for aid: (a) (b) (c) Aid granted for meeting legal requirements; Where it is foreseeable that the achieved purpose of the aided project cannot be maintained after expiry of the eligibility period without further support from public funds; Investments in the property of the Federal Government, the Länder or in the property owned by legal persons at least 25% of whose capital is owned by the Federal Government or the Länder are normally not eligible unless there is a specific federal and/or regional interest, and/or an interest overarching forest ownership types in implementation Aid intensity (37) The aid intensities are the following: (a) 90% of the eligible costs in the case of private beneficiaries and municipalities. 7

8 (b) (c) (d) (e) (f) For the planting of new mixed forests under sub-measure II.2.c (see recital (22)), in private forests, the unpaid, voluntary work of the beneficiaries and their family members is eligible for up to 80% of the expenses that arise for similar labour costs in State-owned forests, as determined by the Kuratorium für Waldarbeit und Forsttechnik (see recital (32)(a)). Aid granted to State beneficiaries (Länder, research institutes, colleges) shall be limited to 75% of the eligible costs in the case of sub-measure II.1 and to 50% in the case of sub-measures II.2(a) and II.2(b). For joint projects, the aid intensity will be determined according to the amount corresponding to the share of each type of ownership (private, municipal or State forests). When determining the aid intensity, the beneficiary s own interest in the action, its involvement in the project as well as the social added value of action will be taken into account. In justified cases, with the exception of profit-oriented enterprises, 100% aid intensity is also possible, in so far as the maximum aid intensities allowed by State aid law are respected. Land purchased is only eligible to an extent not exceeding 10% of the total eligible costs of the operation concerned; in exceptional and duly justified cases, the limit may be raised to 100% for operations concerning environmental conservation (see recital (32)(e)) Cumulation (38) The German authorities confirmed that cumulation with other public support measures is excluded. Projects and activities that are or can be funded from the joint Federal Government/Länder scheme Improvement of agricultural structures and coastal protection (Verbesserung der Agrarstruktur und des Küstenschutzes) are not eligible for aid Applications for aid (39) Applications for aid shall be submitted to the granting authority (Waldklimafonds) before the start of the relevant project or activity, and shall contain the applicant's name, the size of the undertaking, a description of the project or activity including its location and start and end dates, the amount of aid needed to carry it out and the eligible costs. Large enterprises must describe in the application, the situation without the aid i.e. the counterfactual scenario and submit documentary evidence in support of the counterfactual described in the application. The German authorities took a commitment that when receiving an application the granting authority will carry out a credibility check of the counterfactual scenario and confirm that the aid has the required incentive effect Transparency and competition law (40) The German authorities took a commitment that points 128 and 131 of the Guidelines will be complied with. The scheme will be published on the following site: 8

9 (41) The German authorities confirmed that the aid complies with the relevant provisions of competition law, in particular with Articles 101 and 102 of the Treaty. 3. ASSESSMENT 3.1. Existence of aid - Application of Article 107(1) TFEU (42) According to Article 107(1) of the Treaty, "[s]ave as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market". (43) The qualification of a measure as aid within the meaning of this provision therefore requires the following cumulative conditions to be met: (i) the measure must be imputable to the State and financed through State resources; (ii) it must confer an advantage on its recipient; (iii) that advantage must be selective; and (iv) the measure must distort or threaten to distort competition and affect trade between Member States. (44) The scheme in question confers an advantage on its recipients. This advantage is granted through State resources referred to in recital (3), and it favours selectively certain undertakings (see recitals (7)-(13)) by strengthening their competitive position. (45) According to the case law of the Court of Justice, the mere fact that the competitive position of an undertaking is strengthened compared to other competing undertakings, by giving it an economic benefit which it would not otherwise have received in the normal course of its business, points to a possible distortion of competition. 5 Pursuant to the case law of the Court of Justice, aid to an undertaking appears to affect trade between Member States where that undertaking operates in a market open to intra-eu trade. 6 The beneficiaries of aid operate on a market of forestry products where intra-trade takes place. As an example, the EU-28 has produced 425,351 thousand cubic meters of roundwood in 2014 while intra-eu roundwood or forestry trade amounted to 41,004 thousand cubic meters in the same year. 7 The sectors concerned are open to competition at EU level and therefore sensitive to any measure in favour of the production in one or more Member States. Therefore, the notified scheme is liable to distort competition and to affect trade between Member States. (46) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It can therefore be concluded that the notified scheme constitutes State aid within the meaning of that Article. The aid may only be considered compatible with the internal market if it can benefit from one of the derogations provided for in the TFEU Judgment of the Court of 17 September 1980 in Case 730/79 Philip Morris Holland BV v Commission of the European Communities ECLI:EU:C:1980:209. See in particular the judgment of the Court of 13 July 1988 in Case 102/87 French Republic v Commission of the European Communities ECLI:EU:C:1988:391. Source: EUROSTAT 9

10 3.2. Lawfulness of the aid Application of Article 108(3) TFEU (47) The aid scheme was notified to the Commission on 2 May It has not been implemented yet. Therefore, Germany has complied with its obligation under Article 108(3) TFEU Compatibility of the aid Application of Article 107(3)(c) TFEU (48) Aid in the forestry sector is to be assessed under Article 107(3)(c) TFEU, according to which aid may be considered compatible with the internal market if it aims to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. (49) For this derogation to be applicable, the aid must fulfil the requirements of the relevant Union State aid legislation. (50) In the forestry sector, this derogation specifically applies to aid which complies with the Guidelines. (51) The notified scheme excludes from the scope of the beneficiaries undertakings in difficulties, as well as undertakings which are subject to an outstanding recovery order following a previous Commission Decision declaring an aid illegal and incompatible with the internal market (see recitals (12) and (13)). Therefore, the conditions of points (26) and (27) of the Guidelines are complied with Application of the Guidelines (52) As regards the notified aid scheme, Part II, Sections 2.1 (Investments in forest area development and improvement of the viability of forests) and 2.8 (Other aid to the forestry sector with ecological, protective and recreational objectives) of the Guidelines are applicable Common Assessment Principles (53) Contribution to a common objective According to point (47) of the Guidelines, as regards rural development like measures financed exclusively from national funds, in order to ensure coherence with the rural development measures co-financed by the EAFRD under rural development programmes, Member States should demonstrate how the State aid under consideration fits into and is consistent with the relevant rural development programmes. Pursuant to recital (16), Germany has fulfilled this condition regarding the sub-measures falling under Section 2.1 of the Guidelines. Furthermore, in accordance with point (48) of the Guidelines, the Commission considers that the principle of contribution to the objectives of rural development is met regarding the aid measures in Section 2.8 of Part II of the Guidelines, which are outside the scope of rural development, since the Commission has gained sufficient experience as to the contribution of those measures to the rural development objectives. 10

11 (54) Need for State intervention In accordance with point (55) of the Guidelines, the Commission considers that the market is not delivering the expected objectives without State intervention concerning the aid measures fulfilling the specific conditions laid down in Part II of the Guidelines. Therefore, such aid should be considered necessary to achieve the objectives of common interest specified under Section 3.1 of Part I of the Guidelines. The current aid scheme fulfils the specific conditions laid down in Sections 2.1 and 2.8 of Part II of the Guidelines (see recitals (62) to (102)), and therefore point (55) of the Guidelines is complied with. (55) Appropriateness of aid According to point (57) of the Guidelines, the Commission considers that aid granted in the forestry sector, which fulfils the specific conditions laid down in the relevant Sections of Part II of the Guidelines, is an appropriate policy instrument. The current aid scheme fulfils the specific conditions laid down in Section 3.10 of the Guidelines (see recitals (62) to (102)), and therefore point (57) of the Guidelines is complied with. According to point (58) of the Guidelines, where a Member State decides to put in place a rural development like aid measure financed exclusively from national funds, when at the same time the same measure is provided for in the relevant rural development programme, the Member State should demonstrate the advantages of such a national aid instrument compared to the rural development programme measure at stake. Pursuant to recital (16), this provision is complied with. According to point (62) of the Guidelines, as regards investment aid not covered by Regulation (EU) No 1305/2013 as part of the rural development programme or as additional financing for such a rural development measure, where the aid is granted in forms that provide a direct pecuniary advantage (for example, direct grants, exemptions or reductions in taxes, social security or other compulsory charges, etc.), the Member State must demonstrate why other potentially less distortive forms of aid such as repayable advances or forms of aid that are based on debt or equity instruments (for example, low-interest loans or interest rebates, State guarantees or an alternative provision of capital on favourable terms) are less appropriate. Pursuant to recital (17), this provision is complied with. According to point (63) of the Guidelines, with regard to forestry measures in Section 2.8 of Part II of these Guidelines, Member States must demonstrate that the ecological, protective and recreational objectives they are aiming for cannot be achieved with the rural development like forestry measures in Chapters 2.1 to 2.7 of Part II of these Guidelines. Pursuant to recital (16), this provision is complied with. (56) Incentive effect and need for aid Pursuant to recital (39), an aid application shall be submitted by the beneficiary before the relevant activity or project has started and the content of the aid application shall meet the minimum requirements laid down in point (71) of the Guidelines. Therefore, the requirement for incentive effect laid down in point (70) of the Guidelines is complied with. According to the same recital, large 11

12 enterprises must describe in the application, the situation without the aid, which situation is referred to as the counterfactual scenario and submit documentary evidence in support of the counterfactual described in the application. The German authorities also took a commitment that when receiving an application, the granting authority will carry out a credibility check of the counterfactual and confirm that the aid has the required incentive effect. Therefore, points (72) and (73) of the Guidelines are complied with. (57) Proportionality of the aid Points (82) and (84) of the Guidelines stipulate that if the aid amount does not exceed the eligible costs and that the aid intensity respects the ceilings set out in the Part II thereof, the aid is deemed to be proportionate. The current aid scheme fulfils the specific conditions regarding the eligible costs and the aid intensity laid down in Part II, Sections 2.1 or 2.8 the Guidelines as follows: (a) (b) (c) (d) (e) (f) According to point (82) of the Guidelines, in order for the aid to be proportionate, the Commission considers that the aid amount should not exceed the eligible costs. Pursuant to recital (32), this provision is complied with. According to point (84) of the Guidelines, if the eligible costs are correctly calculated and the maximum aid intensities or maximum aid amounts set out in Part II of these Guidelines are respected, the criterion of proportionality is deemed to be fulfilled. Pursuant to recital (32)(a), the eligible standard costs are correctly calculated; and the aid intensities detailed in recital (37) respect the aid intensities laid down in points (512), (532) and (592) of the Guidelines. Point (86) of the Guidelines stipulates that VAT is not eligible for aid, except where it is not-recoverable under national VAT legislation. According to recital (35), this latter provision is also complied with. As regards the personnel costs referred to in recital (32)(a), the standard costs method is acceptable in accordance with the Guidance on Simplified Cost Options (SCOs) for European Structural and Investment (ESI) Funds. 8 Pursuant to recital (18), the provisions of points (96) and (97) of the Guidelines are complied with. Pursuant to recital (32)(e), the provision of point (502)(a) of the Guidelines regarding the 10% limit on land purchase is complied with. As regards the acquisition of land, however, the notified scheme also allows for 100% intensity in exceptional and duly justified cases where the said acquisition is absolutely necessary to achieve the environmental objective of the support. The exceptional cases where the support can go up to 100% of the eligible costs have to fulfil cumulatively a set of conditions. Point (502)(a) of the Guidelines foresees the possibility to increase the limit of 10% of the eligible costs in exceptional and duly justified cases for operations concerning environmental conservation. The Commission notes

13 (58) Cumulation of aid the following. The conditions that the exceptional cases need to fulfil (listed in recital (32)(e)) are meant to achieve the environmental objective of the measure. However, the German authorities have not provided a list of "exceptional and duly justified cases" that may arise. They explained that only very few of "exceptional cases" may arise over the duration of the scheme, and that each of them will be assessed on a case-by-case basis, taking into account the objective of the measure and the conditions that need to be cumulatively fulfilled (see recital (33)). The Commission accepts this explanation as being reasonable. In any event, the Commission notes as well that the higher intensity is given as a last resort measure. The Commission understands that the case-by-case assessment that the competent authorities will perform as regards admissibility of support for land acquisition exceeding the 10% limit of the eligible costs will cover also the condition of the last resort measure. In addition, the German authorities confirmed that the re-sale of land that an individual beneficiary acquired thanks to the support given in this framework is not allowed. In light of the above, the Commission is of the opinion that the aid is proportionate. The German authorities confirmed that cumulation with other public support measures is excluded (see recital (38)). (59) Avoidance of undue negative effects on competition and trade According to point (113) of the Guidelines, the Commission considers that where an aid fulfils the conditions and does not exceed the relevant maximum aid intensities, laid down in the applicable Sections of Part II of the Guidelines, the negative effect on competition and trade is limited to the minimum. The current aid scheme fulfils the conditions laid down in Sections 2.1 or 2.8 of Part II of the Guidelines (see recitals (62) to (102)), and therefore point (113) of the Guidelines is complied with. (60) Transparency Pursuant to recital (40), the transparency provisions of points (128) and (131) of the Guidelines are met. (61) Revision clause According to its point (737), the Guidelines will be applicable until 31 December Pursuant to recital (5), the duration of the proposed scheme lasts until 30 June 2021, but the German authorities took a commitment to align, if needed, the aid scheme with the new Guidelines applicable beyond that date Specific assessment according to the category of aid (62) According to point (502) of the Guidelines, working capital should not be considered as eligible cost for investments in the forestry sector. Pursuant to recitals (30) and (32), this provision is complied with. The same recitals also comply with the common eligible costs listed in point (502) of the Guidelines. Section of the Guidelines Sub-measure II.2.c 13

14 (63) According to point (502)(a) of the Guidelines, the construction, acquisition, including leasing, or improvement of immovable property are eligible costs, with land purchased only being eligible to an extent not exceeding 10% of the total eligible costs of the operation concerned; in exceptional and duly justified cases, the limit may be raised above the percentage for operations concerning environmental conservation. Pursuant to recital (32)(e), this provision is complied with. (64) According to point (505) of the Guidelines, aid for establishment costs and the annual premium may be granted to public and private land-holders and their associations. Pursuant to recital (7), the range of beneficiaries complies with this requirement. Furthermore, pursuant to recitals (30) and (32), the aid within the scope of the present decision only covers establishment costs. (65) According to point (506) of the Guidelines, aid for afforestation of land owned by public authorities or for fast growing trees covers only the costs of establishment. In the case of State-owned land, aid may be granted if the body managing such land is a private body or municipality. Pursuant to recital (30), the scheme only covers the costs of establishment and the body managing such land has to be a private body or municipality. Therefore, the provisions of this point are complied with. (66) According to point (507) of the Guidelines, aid covers the costs of establishment of forest and woodland on agricultural and non-agricultural land. Pursuant to recital (30), this provision is complied with. (67) Pursuant to recital (30), points (508), (509) and (511) of the Guidelines are also complied with. (68) Pursuant to recital (30), aid can be granted for the creation of pioneer forests. This is in line with point (510) of the Guidelines. (69) According to point (512) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this Section of the Guidelines Sub-measure II.1.d (70) According to point (530) of the Guidelines, aid may be granted to natural persons, private and public forest holders and other private law and public bodies and their associations. Pursuant to recital (7), the notified measure is in line with this (71) Pursuant to recital (25), the research related to the reference areas to be established with the aid will contribute to improving the resilience (adaptive capacity) and therefore also the environmental value of forests. Therefore, point (531) of the Guidelines is complied with. (72) According to point (532) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this Section 2.8 of the Guidelines Common provisions for all sub-measures (73) Pursuant to recital (19), point (591) of the Guidelines is complied with. 14

15 (74) According to point (593) of the Guidelines, aid may be granted to undertakings active in the forestry sector. Pursuant to recital (7), the notified measure is in line with this Section of the Guidelines Sub-measure II.2.a (75) The development of concepts for inter-company storage infrastructure (forest contingency plan infrastructure), as well as knowledge collection and method development (e.g. emergency plans, reforestation strategies, longer-term wood storage, logistic concepts) fall under this section (see recital (28)). (76) The measures referred to in recital (28) relate to the maintenance and improvement of forests and to maintaining or restoring their different functions. Therefore, points (589) and (590) of the Guidelines are complied with. (77) According to point (592) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this Section of the Guidelines Sub-measure II.1.a (78) The measure, described in recital (22), is targeted at improving the forests and to promote in particular their ecological and protective functions. Therefore, point (589) of the Guidelines is complied with. (79) Pursuant to recital (22), the measure directly contributes to restoring the ecological and protective functions of forests, biodiversity and a healthy forest ecosystem. Therefore, point (590) of the Guidelines is complied with. (80) According to point (592) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this (81) The measure is targeted at improving soil quality, which in turn contributes to ensuring balanced and healthy tree growth. Therefore, point (596) of the Guidelines is complied with. (82) Pursuant to recital (20), point (597) of the Guidelines is complied with. Sections and of the Guidelines Sub-measure II.1.b (83) The measure described in recital (23) is targeted at maintaining and improving the forests and to promote in particular their ecological functions. Therefore, point (589) of the Guidelines is complied with. (84) Pursuant to recital (23), the measure directly contributes to maintaining or restoring the ecological functions of forests, biodiversity and a healthy forest ecosystem. Therefore, point (590) of the Guidelines is complied with. (85) According to point (592) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this (86) Pursuant to recital (23), the primary objective of the measure is to contribute to maintaining or restoring forest ecosystem and biodiversity or the traditional landscape. Therefore, point (594) of the Guidelines is complied with. 15

16 (87) The measure described in recital (23) inherently contributes to maintaining or improving soil quality and therefore to ensuring balanced and healthy tree growth. Therefore, point (596) of the Guidelines is complied with. (88) Pursuant to recital (20), point (597) of the Guidelines is complied with. Section of the Guidelines Sub-measure II.1.c (89) The measure described in recital (24) is targeted at maintaining and improving the forests and to promote in particular their ecological and protective functions. Therefore, point (589) of the Guidelines is complied with. (90) Pursuant to recital (24), the measure directly contributes to maintaining or restoring the ecological and protective functions of forests, biodiversity and a healthy forest ecosystem. Therefore, point (590) of the Guidelines is complied with. (91) According to point (592) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this (92) Pursuant to recital (24), the primary objective of the measure is to contribute to maintaining or restoring forest ecosystem and biodiversity or the traditional landscape. Therefore, point (594) of the Guidelines is complied with. (93) The measure described in recital (24) inherently contributes to maintaining or improving soil quality and therefore to ensuring balanced and healthy tree growth. Therefore, point (596) of the Guidelines is complied with. (94) Pursuant to recital (20), point (597) of the Guidelines is complied with. Section of the Guidelines Sub-measure II.1.e (95) The measure described in recital (26) is targeted at maintaining and improving the forests and to promote in particular their ecological and protective functions. Therefore, point (589) of the Guidelines is complied with. (96) Pursuant to recital (26), the measure directly contributes to maintaining or restoring the ecological and protective functions of forests, biodiversity and a healthy forest ecosystem. Therefore, point (590) of the Guidelines is complied with. (97) According to point (592) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this (98) Pursuant to recital (26), the primary objective of the measure is to contribute to maintaining or restoring forest ecosystem and biodiversity or the traditional landscape. Therefore, point (594) of the Guidelines is complied with. Section of the Guidelines Sub-measure II.2.b (99) The measure described in recital (29) is targeted at maintaining and improving the forests and to promote in particular their ecological and protective functions. Therefore, point (589) of the Guidelines is complied with. 16

17 (100) Pursuant to recital (29), the measure directly contributes to maintaining or restoring the ecological and protective functions of forests, biodiversity and a healthy forest ecosystem. Therefore, point (590) of the Guidelines is complied with. (101) According to point (592) of the Guidelines, the aid intensity may reach 100% of the eligible costs. Pursuant to recital (37), the notified measure is in line with this (102) Pursuant to recital (29), the primary objective of the measure is to contribute to maintaining or restoring forest ecosystem and biodiversity. Therefore, point (594) of the Guidelines is complied with. 4. CONCLUSION The Commission has accordingly decided not to raise objections to the notified aid on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) TFEU. If any parts of this letter are covered by the obligation of professional secrecy according to the Commission communication on professional secrecy and should not be published, please inform the Commission within fifteen working days of notification of this letter. If the Commission does not receive a reasoned request by that deadline Germany will be deemed to agree to the publication of the full text of this letter. If Germany wishes certain information to be covered by the obligation of professional secrecy please indicate the parts and provide a justification in respect of each part for which non-disclosure is requested. Your request should be sent electronically via the secured system Public Key Infrastructure (PKI) in accordance with Article 3(4) of Commission Regulation (EC) No 794/2004 9, to the following address: agri-state-aids-notifications@ec.europa.eu. For the Commission Phil HOGAN Member of the Commission 9 OJ L 140, , p