Embargo VISTA illimité(*)

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1 EUROPEAN COMMISSION Brussels, C (2015) Embargo VISTA illimité(*) Subject: State aid/germany (Baden-Wurttemberg) Aid No SA (2014/N) Support for pruning of fruit trees in scattered orchards Sir, The European Commission (hereinafter: 'the Commission') wishes to inform Germany that, having examined the information supplied by your authorities on the aid scheme referred to above, it has decided not to raise any objections to the aid scheme in question, since it is compatible with the Treaty on the Functioning of the European Union (hereinafter: 'TFEU'). In taking this decision, the Commission has relied on the following considerations: 1. PROCEDURE (1) In accordance with Article 108(3) of the TFEU, Germany notified to the Commission the State aid scheme mentioned above by electronic communication of 26 November 2014, registered on 26 November (2) On 15 January 2015 the Commission asked Germany for additional information. This was provided on 26 January DESCRIPTION 2.1. Title (3) Baden-Wurttemberg: Support for pruning of fruit trees. (*) Ce timbre porte sur l'ensemble des documents qui composent le dossier Seiner Exzellenz Herrn Dr. Frank-Walter STEINMEIER Bundesminister des Auswärtigen Werderscher Markt 1 D Berlin Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel

2 2.2. Objectives (4) Germany wishes to introduce an agro-environmental measure consisting in the pruning of fruit trees Duration of the scheme (5) From 15 March 2015 until 31 December Budget (6) The overall amount of the scheme is EUR 3.5 million (EUR 0.1 million for 2015, EUR 1.6 million for 2016, EUR 0.6 million for 2017, EUR 0.5 million per year for the years 2018 and 2019 and EUR 0.2 million for 2020). (7) The aid will be financed by national means only (no rural development funds) Beneficiaries and form of aid (8) The beneficiaries of the scheme are SMEs. The total number of beneficiaries is estimated between 101 and 500. (9) Aid can be given to groups of undertakings in the agricultural sector and other land managers and other groups of land managers who voluntarily commit to prune trees in scattered orchards. (10) Aid will be given in the form of an annual direct aid Legal basis (11) Verwaltungsvorschrift des Ministeriums für Ländlichen Raum und Verbraucherschutz für die Förderung des Baumschnitts bei Streuobstbäumen (VwV Förderung Baumschnitt - Streuobst) 2.7. Description of the measure (12) This measure supports the pruning of trees for scattered orchards (Streuobst). According to the German authorities, Baden-Württemberg is home to Europe s largest strips of scattered orchards (9,3 million trees on hectares, almost every second Streuobstbaum of Germany). Characteristics of scattered orchards (13) Therefore, scattered orchards dominate the landscape in many regions in Baden- Württemberg. This type of culture goes back to the 15th or 16th century and it differs from the modern types of orchards in many regards: the range of varieties: estimated varieties of different species, such as apple, pear, cherry, plum (around 700). Many of the local varieties are found only in this geographical area/strip. The high diversity of the genetic heritage needs to be preserved. This diversity is no longer found in intensively cultivated orchards there are few marketable varieties. biodiversity: An estimated species (flora and fauna) are to be found in the scattered orchards. This diversity comes from the combination of two very 2

3 different habitats on a surface: above a light trees from orchards, below meadows and pastures. the recreational function: scattered orchards are often in close proximity to the residential areas of many municipalities and are a favourite recreational area. the social function: Many associations, initiatives and groups actively engage in the exploitation and the preservation of the scattered orchards. The production of fruit trees is often not economically viable. Legal regime of scattered orchards (14) The German authorities maintain that, for scattered orchard owners, only the general legal obligations for owners of arable land apply (i.e. to prevent the deterioration of landscape ensuring a proper grazing or mowing at least once a year). (15) No rules exist as regards the maintenance of trees. The cutting of scattered orchard trees is not a compulsory requirement under other legislation or measures. Necessity of State intervention (16) Scattered orchards are cultivated landscapes created by human intervention, which need a regular pruning. Without pruning trees age prematurely, lose a stable static or die. Neither the traditional fruit tree care nor extensive grassland farming are viable on these areas. The German authorities maintain that therefore around 80% of the trees are no longer cut regularly. Orchards disappear and they are not restored. The scattered orchards get lost without pruning. The State aid measure (17) In view of the characteristics of scattered orchards, Germany maintains that they constitute high nature-value farmed environments, which are under threat and are a landscape and historical features on agricultural land. (18) In order to preserve these valuable landscapes, the German authorities will grant a lump sum of up to EUR 15 per tree for pruning. The respective communes may increase this lump sum by EUR 10 per tree. (19) The German authorities maintain that an orchard has no more than 100 trees per hectare and can reach 200 trees per hectare in very exceptional situations. In these cases, the German authorities committed that the compensation per hectare would not exceed EUR per year. The German authorities committed that the fiveyear average of EUR 900 per hectare for specialised perennial crops will not be exceeded in any event. (20) A collective request (Sammelantrag) for a 5-year period of at least 3 beneficiaries and at least 100 and a maximum of 1500 trees has to be made. The beneficiaries have to present a 5-year plan for their area. The trees of the area concerned have to be cut at least once and not more than twice in the 5-years period. (21) According to the information provided by a study of the University of Hohenheim, the average costs of pruning of trees which have not been pruned for a longer period of time is EUR 25,75 per tree. As shown above (recital (18)), the 3

4 envisaged aid ranges between EUR 15 and 25 per tree. Germany maintains that, given the broader framework conditions for preserving this cultivated landscape (Streuobstwiese), these rates represent an incentive for pruning, but a sound financial management of scattered fruit trees over agricultural land cannot be achieved. (22) Payments are calculated on the basis of the economic costs incurred after having taken up this environmental commitment. The scheme does not include any transaction costs. (23) According to the information provided by the German authorities, the aid will only cover a part of the cost incurred by the orchard owner for pruning (recital (21)) Cumulation (24) The German authorities have confirmed that the aid cannot be cumulated with aid received from other local, regional, national or EU schemes to cover the same eligible costs Incentive effect and aid to large undertakings (25) The German authorities state that the aid cannot be awarded wherever the work on the relevant project or activity has already started prior to the lodging of the aid application by the beneficiary to the national authorities. (26) According to the German authorities, large undertakings are not eligible under this scheme Other commitments (27) The German authorities confirmed that the aid would not apply to firms in difficulty within the meaning of the Guidelines on State aid for rescuing and restructuring non-financial undertakings1. (28) Germany committed to suspend the payment of the aid if the beneficiary still has at its disposal an earlier unlawful aid that was declared incompatible by a Commission Decision (either concerning an individual aid or an aid scheme), until that beneficiary has reimbursed or paid into a blocked account the total amount of the unlawful and incompatible aid including the corresponding recovery interest. (29) Germany made a commitment to publish the information required under point (128) of the Guidelines for State aid in the agricultural and forestry sectors and in rural areas (hereinafter: the "Guidelines")2 by the deadline set in point (131) of the Guidelines. 1 The definition of undertakings in difficulty applied under the European Union Guidelines for State aid in the agricultural and forestry sectors, OJ C 204 of , p. 1., is covered by the one that applies in the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (OJ C 249 of ). 2 OJ C 204, , p

5 3. ASSESSMENT 3.1. Existence of State aid (30) For Article 107(1) TFEU to apply, the measure must provide an economic benefit to an undertaking, the aid must be selective, the benefit must be granted by the State or through State resources and the aid must threaten to distort competition and be capable of affecting trade between Member States. (31) The measure is financed out of State resources, from the State budget (recital (7)). It benefits only certain undertakings (i.e. orchard owners) (recital (9)). (32) The scheme has the potential to distort competition as it confers an economic advantage to its recipients. 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. (33) Aid to an undertaking is likely to affect trade between Member States where that undertaking operates in a market open to intra-union trade. The beneficiaries of aid operate on a market where trade between Member States takes place. The sector concerned (i.e. agriculture) is thus 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 present scheme is liable to distort competition and to affect trade between Member States. (34) In light of the above, the measure at hand constitutes State aid as the conditions of Article 107(1) TFEU are fulfilled. It may only be considered compatible with the internal market if it can benefit from one of the derogations provided for in the TFEU Compatibility of State aid (35) In the present case, Article 107(3)(c) TFEU provides the appropriate basis for compatibility. Under that provision, aid to facilitate the development of certain economic activities or of certain economic areas may be considered to be compatible with the internal market where such aid does not adversely affect trading conditions to an extent contrary to the common interest. (36) In the agricultural sector, this derogation applies to aid which complies with the Guidelines. 3.3 Application of the Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (37) As regards the notified aid scheme, Part II, Chapter on aid for agrienvironment-climate commitments of the Guidelines is applicable. According to point (207) of the Guidelines, this type of aid has to comply with the common assessment principles of the Guidelines and the specific conditions set up in points (208) to (230) of the Guidelines. 5

6 Common Assessment Principles (38) In conformity with point (43) of the Guidelines, the scheme aims to promote the efficient and sustainable use of resources in the German orchard sector. Pursuant to point (47) of the Guidelines, the German authorities demonstrate how the present scheme fits into and is consistent with the Rural Development Programme Germany The measures under this scheme are rural development-like. This scheme is designed in a consistent manner with Regulation no 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)3. (39) In line with point (52) of the Guidelines, the German authorities assess the environmental impact of the schemes, demonstrating that the aid measure does not result in an infringement of applicable Union environmental protection legislation. The German authorities foresee protection measures to respect environmental sensitivities, including the protection of habitats and species. (40) According to points (53)-(54) of the Guidelines, State aid can achieve an objective of common interest if it is targeted towards the correction of market failures. In order to prove this, Member states have first to diagnose the problem (market failure to be addressed). (41) The German authorities have stated that the measure needs State intervention on grounds of market failure in pruning this economically not viable type of orchard (recital (16)). State support is required in order to encourage reluctant orchard owners to prune their trees and thus maintain this type of valuable landscape. The conditions on the need for State intervention are therefore met. (42) Pursuant to points (56) and (57) of the Guidelines an aid is appropriate if no other less distortive policy instrument or other less distortive type of aid make it possible to achieve the same contribution to the objectives of CAP. The German authorities inform that other potentially less distortive forms of aid do not exist at the moment, as referred in point (62) of the Guidelines. The Commission therefore considers the aid instruments appropriate and the specific aid forms are in line with the Part II of the Guidelines. (43) In conformity with point (66) of the Guidelines, the scheme has an incentive effect if it changes the behaviour of undertakings in such a way that they engage in additional activity contributing to the development of the sector, in which they would have normally not engaged in without aid or would have engaged in a different or restricted manner. Given the fact that, in the absence of the aid orchard owners rather don t prune these trees (recitals (14)-(16)), the state intervention has an incentive effect. (44) According to points (70)-(71) of the Guidelines, the project should not start prior to the aid application and this application has to comprise at least the name of the applicant, its size and the eligible costs. As described in recitals (20) and (25) above, the conditions set out in points (70)-(71) of the Guidelines regarding the incentive effect are met. 3 OJ L 347, , p

7 (45) Pursuant to point (84) of the Guidelines, proportionality is fulfilled if the eligible costs are in line with the specific conditions set out in Part II of the Guidelines and the maximum aid intensities for each type of aid are respected. The aid intensities of the scheme comply with the maximum aid intensities of the Guidelines as shown below. (46) Points (99)-(100) of the Guidelines contain rules on cumulation. As the German authorities have confirmed that aid cannot be cumulated with aid received from other local, regional, national or EU schemes to cover same eligible costs, these points are not applicable to the scheme at hand. (47) Pursuant to point (113) of the Guidelines, the negative effect on competition and trade is limited to the minimum and the aid has positive effects on the development of the sector if it fulfils the conditions set out in Part II of the Guidelines and does not exceed the relevant maximum aid intensities specified therein. As the conditions of Part II of the Guidelines are complied with (see section below), the negative effect on competition and trade is limited to the minimum. (48) In accordance with the requirements of point (128) of the Guidelines, the German authorities specify that the relevant information will be published on the website of the granting authority (recital (29)). Specific assessment according to the category of aid (chapter of the Guidelines) (49) According to chapter of the Guidelines, the Commission will consider aid for agri-environment-climate commitments compatible with the internal market under Article 107(3)(c) of the Treaty if it complies with the common assessment principles of these Guidelines and with the conditions set up in points (208)-(230) of the Guidelines. (50) According to point (208) of the Guidelines, the aid can be awarded to undertakings and groups of such undertakings which undertake, on a voluntary basis, to carry out operations consisting of one or more agri-environment-climate commitments. As described in recitals (8)-(9) above, this condition is complied with. (51) According to point (209) of the Guidelines, the measure must aim at the preservation as well as at the promotion of the necessary changes to agricultural practices that make a positive contribution to the environment and climate. As described in recital (16) above, this condition is complied with. (52) According to point (210) of the Guidelines, the aid will cover only those voluntary commitments going beyond the relevant mandatory standards established pursuant to Chapter I of Title VI of Regulation (EU) No 1306/2013, the relevant criteria and minimum activities as established pursuant to points (c)(ii) and (c)(iii) of Article 4(1) of Regulation (EU) No 1307/2013, and relevant minimum requirements for fertiliser and plant protection products use as well as other relevant mandatory requirements established by national law. The German authorities have explained that only the mandatory standards for greenland apply and there are no specific standards for scattered orchards. The condition of point (210) of the Guidelines is fulfilled. 7

8 (53) According to point (211) of the Guidelines, Member States should endeavour to ensure that the undertakings that undertake to carry out operations under this measure are provided with the knowledge and information required to implement them. The German authorities maintained that these operations can only be made according to the technical specifications for such operations (fachgerechter Baumschnitt) and the undertakings that will carry out these operations have the required knowledge and information. The condition of the Guidelines is therefore met. (54) According to point (212) of the Guidelines, commitments under this measure must be undertaken for a period of five to seven years. The envisaged commitment period of five years (recital (20)) is in line with the requirements of the Guidelines. (55) According to point (214) of the Guidelines, aid for agri-environment-climate commitments to other land managers and other groups of beneficiaries than undertakings active in the agricultural sector may be granted under Section 3.4 of Part II these Guidelines. This scheme applies to this category of beneficiaries (recital (9)) as well and therefore the compliance with Section 3.4 needs to be assessed. This section contains in substance the same requirements as Section analysed in this chapter of the assessment. As the same conditions apply for agricultural and non-agricultural undertakings under the scheme, the assessment for non-agricultural undertakings of this section apply mutatis mutandis to non-agricultural undertakings. The conditions of Section 3.4 are therefore met. (56) According to point (220) of the Guidelines, aid may be provided for the conservation and for the sustainable use and development of genetic resources in agriculture for operations not covered by the provisions under points (208) to (219) of this Section. The German authorities have demonstrated that the aid is targeted for the sustainable use of traditional scattered orchards, which have valuable landscape features (recital (13)) and that in the absence of pruning these local varieties and landscapes will be lost. The condition of point (220) of the Guidelines is therefore complied with. (57) According to point (221) of the Guidelines, aid, with the exception of aid for operations for the conservation of genetic resources as referred to in point (220), covers compensation to beneficiaries for all or part of the additional costs and income foregone resulting from the commitments they made. The aid must be granted annually. The German authorities cover the costs for pruning only and the aid is granted annually. The condition of point (221) of the Guidelines is therefore met. (58) According to point (228) of the Guidelines, aid, with the exception of aid for operations for the conservation of genetic resources as referred to in point (220), must be limited to the following maximum amounts: EUR 600 per hectare per year for annual crops; EUR 900 per hectare per year for specialised perennial crops; EUR 450 per hectare per year for other land uses; EUR 200 per livestock unit per year for local breeds in danger of being lost to farming. These amounts may be increased in duly substantiated cases taking into account specific circumstances to be justified in the notification to the Commission. The German authorities committed that according to the general conditions of the scheme the five-year average of EUR 900 per hectare for specialised perennial crops will not 8

9 be exceeded (recital (19)). The condition of point 228 of the Guidelines is therefore fulfilled. (59) Taking the above into consideration, the Commission considers that the requirements regarding the compatibility of aid for agri-environmental commitments are fulfilled. 4. CONCLUSION (60) In line with the foregoing, the Commission considers that the relevant provisions of the Guidelines are complied with. (61) The Commission has accordingly decided not to raise objections to the aid on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) TFEU. (62) 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, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: (63) 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. (64) 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, to the following address: agri-state-aidsnotifications@ec.europa.eu. Yours faithfully, For the Commission Phil HOGAN Member of the Commission 9