Commission approves €1.3 billion German State aid scheme for rewetting of farmed peatlands

The European Commission has approved, under EU State aid rules, a €1.3 billion German scheme to support landowners and land managers of drained peatlands that commit to rewet their land. The scheme aims to reduce greenhouse gas emissions by increasing carbon storage in peatlands.

The German scheme

Peatlands are wetland ecosystems where plant material does not fully decompose and accumulates as peat, which acts as a natural carbon store. In Germany, the draining of peatlands, which are currently used for agriculture and forestry, is responsible for 7% of annual greenhouse gas emissions. With this scheme, the German government aims to prevent further decomposition of the peat body and, where possible, to restore peat soils as natural carbon sinks.

The scheme will support measures for the permanent and extensive rewetting of peatlands and for the subsequent agricultural and forestry use of peatlands at elevated water levels in so-called paludicultures. Specifically, the scheme covers costs for preparatory advisory services, investments for the implementation phase, compensation for economic damage resulting from the rewetting and aid to establish paludicultures.

Under the scheme, the aid will take the form of direct grants and will cover up to 100% of eligible costs. To incentivise the uptake of rewetting measures and to help establish a viable market for paludicultures, beneficiaries that join the scheme within one year are eligible for a 20% speed bonus. Eligible beneficiaries are stakeholders for the implementation of extensive rewetting projects in Germany such as landowners, land managers and owners of drainage infrastructure.

The scheme will run until 31 December 2029.

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 European Union ('TFEU'), which allows Member States to support the development of certain economic activities under certain conditions, and the 2022 Guidelines for State aid in the agricultural and forestry sectors and in rural areas ('2022 Agricultural Guidelines').

The Commission found that:

• The scheme facilitates the development of an economic activity.
• The scheme has an incentive effect, as the projects would not take place without the public support.
• The scheme is necessary and appropriate to achieve the objectives pursued and the aid complies with the relevant conditions of the Agricultural Guidelines, either directly or by analogy.
• The aid is proportionate, as it is limited to the minimum necessary and will have a limited impact on competition and trade between Member States.
• The aid brings about positive effects that outweigh any potential distortion of competition and trade in the EU.

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

Background

The 2022 Agricultural Guidelines provide guidance on how the Commission assesses the compatibility of State aid measures in the sector under Article 107(3)(c) TFEU. The Guidelines create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support and contribute, among other things, to the objectives of the Common Agricultural Policy. The 2022 Agricultural Guidelines aim to help Member States design national measures and meet national and EU's goals at the least possible cost for taxpayers and without undue distortions of competition in the Single Market.

For More Information

The non-confidential version of the decision will be made available under the case number SA.118115 in the State aid register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.