EUROPEAN COMMISSION. State aid / Netherlands SA (2016/NN) Model regulation - Grant Scheme nature and landscape management

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1 EUROPEAN COMMISSION Brussels, C(2016) 3732 final Subject: State aid / Netherlands SA (2016/NN) Model regulation - Grant Scheme nature and landscape management Sir, The European Commission ("the Commission") wishes to inform the Netherlands 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 part of the relevant scheme covered by the present decision 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 16 December 2013 the Netherlands pre-notified this aid scheme to the Commission, registered by the Commission on the same day. The Commission has requested additional information on 9 September 2014, which the Dutch authorities provided on 10 November By letter of 5 March 2015, registered by the Commission on the same day, the Netherlands notified, according to Article 108(3) TFEU, the above mentioned aid scheme. The Commission has requested additional information to the Dutch authorities on 5 May 2015, 9 September 2015 and 18 December 2015 which the Dutch authorities provided on 9 July 2015, 21 October 2015, 6 January 2016 and 7 April By means of electronic communication dated 1 March 2016 and 6 April 2016 the Netherlands and the Commission agreed on an extension of the H.E. Mr. Bert KOENDERS Minister of Foreign Affairs Bezuidenhoutseweg 67 Postbus NL EB Den Haag Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel

2 decision deadline in accordance with Article 4(5) of Council Regulation (EC) No 2015/ (2) By letter dated 14 April 2016, the Commission informed the Dutch authorities of the fact that since the amendments of the notified measure were put into effect before being approved by the Commission, the case had been transferred to the "NN register" (non-notified aid) and requested supplementary information regarding the implementation of the amendments to the scheme, which the Dutch authorities supplied with letter of 20 April With letter of 1 June 2016, registered by the Commission on the same day the Dutch authorities confirmed that the notified tax exemption also applies to nature management in forest areas. 2. DESCRIPTION 2.1. Title (3) Model regulation - Grant Scheme nature and landscape management (Modelverordening - Subsidieverordening Natuur- en Landschapsbeheer, hereinafter: "SVNL") 2.2. Objective (4) The present aid scheme SVNL notified by the Dutch authorities contains the measures: "Subsidy nature management" (including forestry nature management), "Subsidy landscape management" and "Subsidy organisation costs", which have as main objective to maintain and to develop the biodiversity by means of providing support to the management of the nature. The measures are especially targeted towards the protection of environment and nature. The Dutch authorities consider that their policy regarding nature development and nature management follows the guidance of the Convention on Biological Diversity, the Millennium development Goals and the policy of the European Union offer guidance. The aid scheme at hand concerns two amendments to the measures "Subsidy nature management" (see section ; both amendments also apply to nature management in forest areas (see section )) and "Subsidy landscape management" (see section ). (5) In this respect the Dutch authorities refer to the conclusions by the Environment Council on 15 and 16 March 2010 which confirm that biodiversity is also a high priority in Europe 2. Furthermore, it is referred to the conclusions of the European Council of 25 and 26 March which also demonstrate the importance of biodiversity within the European Union, emphasising the urgent need to remedy biodiversity loss and ecosystem degradation and endorsing the OJ L 248, , p. 9. The Dutch authorities indicate that the Council set a new EU target for the protection of biodiversity for 2020 to stop the loss of biodiversity and the degradation of ecosystem services by 2020 and stressed that protected areas and ecological networks are a cornerstone of efforts to preserve biodiversity. The Council also agreed on a long-term objective that by 2050 the biodiversity in the European Union should be appropriately restored, protected and valued (reference: 7536/10). EUCO 7/10. 2

3 long-term objective and 2020 target included in the above mentioned conclusions. (6) According to the Dutch authorities, the granting of nature management support has a demonstrable and significant positive environmental effect on the improvement of biodiversity, water quality and soil quality. The policy of the Dutch government aims to carry out nature management in such a way that the various nature conservation areas in the Netherlands operate together. To this end, a National Ecological Network (EHS), a network of linked nature conservation areas that connect habitats and thereby promotes biodiversity, was developed. (7) State support is required in order to encourage managers of nature land and farmers to take part in the measures, which they would otherwise not, or to a very limited extend, do because of the low income and high costs related to nature conservation and recovery. Without the aid the desired nature management would not take shape Legal basis (8) The aid scheme has as legal basis the "Law on Provinces", the "Model regulation - Grant Scheme nature and landscape management ", and the "Law Income Tax 2001" Duration (9) From 1 January 2014 until 31 October The present decision does not alter the end date of the existing scheme, which remains 31 October Budget (10) The overall budget for the notified aid scheme is EUR 10.7 million, which is foreseen for the amendment regarding the tax exemption, of which EUR 9.4 million for the measure "Subsidy nature management" and EUR 1.3 million for the measure "Subsidy landscape management". The annual budget for these two measures is estimated at EUR 2.8 million. The budget for the measure "Subsidy organisation costs" remains unchanged by the notified amendments Beneficiaries (11) Aid for the measures "Subsidy nature management" and "Subsidy landscape management" may be granted to all natural persons or legal entities or associations of natural or legal entities authorised to manage the nature area or the landscape element on a nature area (hereinafter: "nature managers") 4. Eligible for the aid are both land management organisations (TBOs), which are foundations and associations such as Natuurmonumenten and Provinciale Landschappen and non-tbos that manage nature conservation areas such as individuals, foundations and municipalities. Beneficiaries of aid for nature 4 Articles and SVNL. 3

4 management in forest areas are undertakings that are active in the forestry sector, including "Staatsbosbeheer" 5 (recital (37)). (12) The beneficiaries of the aid under measure "Subsidy organisation costs" are all farmers active in the primary agricultural production and who fulfil the eligibility criteria (recitals (46) and (47)). (13) The total number of beneficiaries is estimated between 101 and 500. (14) The aid scheme at hand defines that aid is not granted to: undertakings in difficulty within the meaning of the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to (hereinafter: the "Guidelines" or the "Guidelines 2014 to 2020"); undertakings, which are subject to an outstanding recovery order following a previous Commission Decision declaring aid illegal and incompatible with the internal market; public legal entities, with the exception of "Staatsbosbeheer"; legal entities which have water extraction as an objective, or private legal entities which manage land and water, which are owned by public legal entities or water extraction companies Description of the aid scheme (15) Under the present aid scheme (SVNL), the Dutch authorities wish to continue granting aid for the following measures originally supported under the State aid schemes SA (measures "Subsidy nature management" and "Subsidy landscape management") and SA (sub measure nature management in forestry areas and measure "Organisation costs"), both approved by Commission with a duration until 31 October The aid scheme at hand concerns two amendments to the measures "Subsidy nature management" (see section ; both amendments also apply to nature management in forestry areas (see section )) and "Subsidy landscape management" (see section ). These measures remain unchanged in terms of technical parameters, beneficiaries, subject of the aid and objective, compared to the measures Staatsbosbeheer is a legal entity governed by public law that can exercise economic activities e.g. sale of land and wood. Wet van 11 september 1997 tot verzelfstandiging van Staatsbosbeheer (SA.35807, footnote 8 below). In accordance with point (26) of the Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 undertakings in difficulty are excluded from the scope of these Guidelines (OJ C 204, , p. 1, as amended by Commission Notice amending the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 (OJ C 390, , p.5). The definition of undertaking in difficulty is mentioned in point (35)15 of these guidelines. State aid SA (N 376/2010) Subsidies for nature management, approved by Decision C(2011)2631 of Measures: "Subsidy nature management", and "Subsidy landscape management". State aid SA (2013/N) Model act concerning subsidies for the management of nature and landscape, approved by Decision C(2013)7036 of Measures: Nature management in forest areas, "Subsidy agri-environmental management" and "Subsidy organisation costs". 4

5 previously authorised by the Commission. Also with regard to the eligible costs and aid intensities there are no changes. The duration of the scheme until remains the same as previously established. (16) The measure "Organisation costs" remains unchanged and is part of the notification because the new Guidelines apply. (17) Aid under the scheme may be granted under the SVNL, which is a model framework regulation on the basis of which provincial authorities in each province will adopt provincial aid schemes. For the purpose of implementing the SVNL, the provinces draw up a nature management plan 9 (natuurbeheerplan) for their territory. This plan defines the areas covered by the plan and the use of the area by means of the type of nature management activities for which subsidy may be granted. (18) The scheme is set up as a State aid scheme, which is entirely financed by State funds and managed by the Dutch provinces. The subsidies granted under the notified scheme are not part of the Dutch rural development programme. Measures "Subsidy nature management" and "Subsidy landscape management" do not exist as a rural development measure. A measure similar to "Subsidy organisation costs" exists under the Rural Development Regulation (EU) No 1305/ and is part of the Dutch rural development programme (RDP). The notified State aid scheme at hand includes the financial settlement, not the granting, of previously made agri-environmental commitments for activities which are implemented by the Dutch provinces and thus are not part of the measures of the Dutch national RDP. The Dutch authorities demonstrate that there is no inconsistency with the rural development plan, in contrary the measures of the scheme at hand and those of the rural development plan complement and strengthen, but do not overlap each other Measures "Subsidy nature management" and "Subsidy landscape management" (19) The aid for the measures "Subsidy nature management" and "Subsidy landscape management" has been authorised by the Commission under aid scheme SA The notified aid scheme concerns two amendments to these two measures, which are (1) the introduction of a certificate for nature management, which nature managers have to present if they manage more than 75 hectares of nature or landscape area and (2) the re-introduction of an income tax exemption for the grants received (see section below). (20) The Dutch authorities confirmed that there are no other modifications to the previously authorised aid scheme. (21) Subsidies for nature management relate to subsidies for maintaining a nature management type within a nature conservation area 11. The nature management type is a certain kind of nature and subject of this notification are large scale On the basis of Article 2.1 of the SVNL. OJ L 347, , p A nature management type is a kind of nature as included in annex 1 of the SVNL. The nature types subject of the current notification are numbered as N01, N02, N03, N04, N05, N06, N07, N08, N09, N10, N11, N12 and N13. 5

6 dynamic nature (e.g. sea areas), rivers, brooks and wells, dead water, marshlands (e.g. cut reed land), bogs and moors, dunes, salting, dry, damp, rich and bird grasslands. The subsidy for nature management may be increased by a compensation for maintaining a recreational package (recreatiepakket) in the area concerned. The recreational package is described in annex 2 of the SVNL and consists of obligations to enable the use of nature conservation areas for recreational purposes. (22) Subsidies for landscape management in nature conservation areas relate to subsidies to maintain a landscape element within a nature conservation area 12. The landscape elements subject of this notification are for instance puddles and little (historic) lakes, wooded banks, certain hedges, certain tree structures, avenues, pollard willows, orchards and /quarries 13. (23) The SVNL describes how to manage and develop nature conservation areas (natuurgebieden) and landscape elements (landschapselementen) and how this is supported. (24) As regards the eligible costs, for each nature management type and landscape management type an average package of management measures is established for which a single standard net cost price is calculated, resulting in the aid amount per hectare. The calculation of the management costs for each area is based on standard costs (standaardkostprijs). The net standard costs are laid down in the documents "Standard costs for nature management types" (standaardkosten voor natuurbeheertypen) and "Standard costs for landscape management types" (standaardkosten voor landschapsbeheertypen). (25) These documents set out, for each nature and landscape management type, the measures the manager would need to take and the corresponding activities to be carried out, the labour units involved, the circumstances determining the standard, the source of that standard, the number of hours per hectare required, the standard amount per hectare, the annual frequency and the percentage of the area to be worked on. Any revenues from (by-)products, such as sale of reed, wood chips, lease of land, are taken into account in determining the net standard costs, by deducting the expected revenues 14 from the calculated costs before arriving at the (net) standard costs These are included in annex 6 of the SVNL. The landscape management types, a group of landscape elements are defined as L01.01 up to and including L01.09 and L In particular regulated by chapter and of the SVNL. For example, the net standard cost calculation for maintaining cut reed land (nature management type N.05.02) includes costs for pre-defined activities for regulating the water level, milling/draining/cutting/compost of land and watercourses and deducts revenues for reed land and moors from sale of reed and wood chips. The compensation is limited up to 84% of the thus calculated net standard cost price, in order to exclude compensation for indirect costs (footnote 16) and to arrive at the eligible net standard cost price per hectare. Standard costs were determined on the basis of experience and by reference to the nature, forestry and landscape standards book, established by Alterra, a knowledge centre for the green living environment which carries out strategic and applied research for policy, management and design of the green environment at local, regional, national and international level. Alterra is part of Wageningen University and Research Centre ( 6

7 (26) The subsidy amount per hectare is determined at 84% of the net standard costs 16. The remaining expenditure must be financed by nature managers. The aid is granted for six consecutive calendar years 17. Each annual fee is based on the fixed rate of the nature management type and the total amount of hectares for which the subsidy will be provided. The Dutch authorities explained that due to the qualification of each area in the nature management plan, only one type of management subsidy under the SVNL can be obtained for a specific area. The Dutch authorities consider the aid instrument and form of the aid appropriate as other potentially less distortive forms of aid do not exist to encourage land managers to enter into nature maintenance activities which go hand in hand with low revenues and relatively high costs. (27) Apart from the notified amendments, the previously authorised aid scheme remains unchanged. For a more detailed description of the measures "Subsidy nature management" and "Subsidy landscape management" see the description in the Decision approving State aid SA Amendments to the measures "Subsidy nature management" and "Subsidy landscape management" (28) In comparison to the previously authorised aid scheme the present notification includes the following two amendments: (1) the introduction of a certificate for nature management and (2) the re-introduction of an income tax exemption. Both changes concern the subsidies for nature management (including the nature management in forest areas) and landscape management. (29) The aid measure already includes the possibility to work with a certificate for nature management. A nature manager may obtain such a certificate based on a quality manual, in which he describes in detail how he manages and how he controls this management process. It provides a guarantee to the granting authorities that the nature management occurs well and at a determined quality level. (30) Because of the advantages of the certificate for nature management, the granting authorities want to oblige this certificate for all nature administrators who manage more than 75 hectares of nature and/or landscape on nature areas. For nature managers with less than 75 hectares the possibility of a certificate remains on a voluntary basis. The consequences of obligatory certification are: if as a result of controls, it shows that a nature manager does not meet the conditions and the certificate is withdrawn, at the same time also the subsidy for nature management is established proportionally and withdrawn for the remainder of the term. In this manner the subsidy is only paid for the management that is actually performed, the aid measure already includes the possibility to increase or decrease the size of the managed area during the duration. The granting authorities can now choose in consultation with a certified nature manager to implement such changes not interim, but only in the last management year. The manager shall in that case have the obligation to keep an This would reflect compensating only the direct costs related to the management activities and not the indirect costs (e.g. overhead costs). A subsidy is granted for six years (six annual payments, Articles and SVNL). 7

8 administration which keeps track of the changes that occur (when, what management type etc.). The quality of that administration is assured by means of the certificate. In addition, by not having to adapt the granting of the aid with each change, but to concentrate it at that single moment, costs for implementation become lower. (31) The Dutch authorities confirmed that the changes with regard to the certificate for nature management have no effect on the subsidy received, the amount thereof or, the individual obligations. (32) The other amendment to the scheme now notified concerns a tax exemption with regard to the "subsidy nature management" and the "subsidy landscape management". Besides the compensation for costs, the notified scheme for these measures includes a regulated income tax exemption of the compensation being paid to beneficiaries. This is a continuation of the policy under State aid NN 47/ For these grants a tax exemption applies in the sense that they are not included in the taxable profit of the income tax. The tax exemption, which the provincial authorities in consultation with the national Government want to apply, leads to an equal treatment of all beneficiaries. In a situation without exemption every beneficiary, depending on his tax situation, would receive a different fiscal treatment, which eventually would lead to differences of the net compensation of the costs. (33) If the present scheme did not contain an income tax exemption on the compensation offered for the nature management, landowners would only receive a partial compensation for these costs, which would probably lead to a lower uptake of the whole scheme. Another reason for the income tax exemption is that the Dutch authorities wish to further stimulate nature management by private firms. (34) The national legal basis is provided in Article 3.13 "Other exemptions" of the Dutch law Income tax This Article of the general tax legislation provides that the advantages from schemes, with regard to the development and conservation of forest and nature, when designated by a ministerial order, are exempted from taxation Nature management in forest areas (35) The Dutch authorities confirmed that the conditions of the subsidy for nature management in forest areas as approved in case SA (N 545/2009) and its amending cases 19 will not change, except for the introduction of the certificate for nature management and the tax exemption as described above in section State aid NN 47/2004 Nature Program Management - approved with Decision C(2008)7042 of , which ended on 31 December Thereafter the tax exemption continues to apply without any change. State aid SA (N 545/2009) NL Nature and landscape management (agricultural and forestry aspects), approved with Decision C(2011)581 of , amended with SA approved with Decision C2011)1804 of (cancellation of the tax exemption for forestry nature management) and with SA (increase of budget for forestry nature management, amendments to agricultural nature management types and prolongation of duration of the scheme up to ), approved with Decision C(2013)7036 of

9 (36) According to Chapter 3 of the SVNL, the subsidy for nature management is meant for measures that aim to preserve a nature management type (natuurbeheertype). There are four types of nature management concerning forests: a) moist forests (N14), b) dry forests (N15), c) forests with production function (N16), and d) cultural historical forests (N17) 20. The subsidy for nature management in forest areas may be increased by a compensation for maintaining a recreational package (recreatiepakket), if the applicable conditions are fulfilled (recitals (21) and (41)). (37) Following an application, the provincial authorities may grant a subsidy for nature management in forest areas to undertakings that are active in the forestry sector. The contract will be for six years and the subsidy will be paid annually. Each annual fee is based on the fixed rate of the nature management type and the total amount of hectares for which the subsidy will be provided. The Provincial Executives of the Provinces determine each year the rates per nature management type and publish them in the "Provinciaal Blad" as "Openstellingsbesluit", which will be adopted before the start of each year. (38) Aid up to 84% of the net standard eligible costs calculated for the management package implemented (recitals (24), (25) and (26)) by the beneficiary is allotted for measures that contribute directly to maintaining or restoring the ecological, protective and recreational functions of forests, biodiversity and a healthy forest ecosystem. The types of activities falling under nature management for forestry include planting, pruning, thinning and felling of trees and other vegetation in existing forests, removing fallen trees, afforestation for environmental reasons, maintaining and improving the soil quality in forests and ensuring balanced and healthy tree growth, pest management and preventing tree diseases, regulation of water levels, retaining and drainage of water, maintenance of ditches, watercourses, dams, natural pathways, marking and measuring of trees and harvesting of wood and by-products. (39) The Dutch authorities have confirmed that no aid shall be granted to forest based industries, for the transportation of timber or for the processing of wood or other forestry resources into products or for energy generation. Moreover, no aid shall 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. Furthermore the Dutch authorities have confirmed that the measure does not include soil improvement by fertilisation and other treatments to maintain natural balance, reducing excessive vegetation density and ensuring sufficient water retention and proper drainage. Also, the measures shall not reduce biodiversity, neither cause nutrient leaching, nor adversely affect natural water ecosystems or water protection zones. (40) The Dutch authorities have confirmed that aid for the implementation of the habitats Directive 21 and the Birds Directive 22 is excluded A nature management type concerning forest area is a kind of nature as included in annex 1 of the SVNL. The nature types concerning forest areas subject of the current notification are numbered as N14, N15, N16 and N17, Council Directive 92/43/EEC of 21 May 1992, OJ L 206, , p. 7. Directive 2009/147/EC of 30 November 2009, OJ L 20, , p. 7. 9

10 (41) In order to be eligible for the subsidy the beneficiary must ensure, among other things, that: all management activities are conducted that are necessary for the preservation of the nature management types within the nature conservation area and no activities are carried out that could deteriorate their preservation status; in case of a recreational package, it complies with annex 2 of the SVNL which provides that the subsidy is granted for the implementation of the package within a (or part of the) nature conservation area, which is accessible, is maintained in order to allow for recreational use and remains open free of charge throughout the entire year. (42) Except for the introduction of the certificate for nature management and the tax exemption, the sub measure regarding the forest nature maintenance activities has not changed in comparison to the approved aid schemes mentioned in footnote 19 above. The certificate and the tax exemption provide the same advantages to the forest nature management as described above in section Measure "Subsidy organisation costs" (43) The Dutch authorities confirmed that the notification at hand does not entail any change to the measure "Subsidy organisation costs" compared to this measure as approved in State aid files SA and SA (44) The subsidy for organisation costs is a grant for the organisation of activities that are aimed to support and encourage agricultural nature management. (45) The grant is provided to an agricultural nature association, which is a legal entity which following its statutes has as an objective to provide support and to encourage agricultural nature management for the benefit of the farmers. The aid is not directly paid to the farmers. The Dutch authorities have confirmed that the associations providing the knowledge transfer have qualified and regularly trained staff. (46) The Dutch authorities have confirmed that the aid is available to all eligible farmers in the area concerned, regardless of the membership of the association providing the support services and that the contribution of non-members is limited to the administrative costs of the association. Under this measure technical support is provided in relation to the agricultural nature management by farmers, who are small and medium sized enterprises. (47) The necessary costs for the organisation of activities aimed at supporting agricultural nature management are eligible. These activities focus on (a) knowledge promotion, quality assurance and professionalization of agricultural nature management, (b) acquisition actions and application of guidance to farmers, (c) promotion, support and coordination of this management within an area and (d) monitoring and supervision for the ecological control in an area. 10

11 2.8. Aid intensity and form of the aid (48) The aid intensity for the measures "Subsidy Nature management" and "Subsidy landscape management" is 84% of the net standard eligible costs. The measures are financed from State resources on the basis of flat-rate costs or lump sums described in sections and above, in the form of direct grants. These standard eligible costs and the aid per hectare are defined beforehand by the Dutch authorities. A specific calculation of the amount of aid per hectare and the aid intensity therefore does not take place at the moment of the payment. The scheme includes a tax exemption on the grants received (sections and ). (49) The SVNL stipulates that maximum aid intensity for the measure "Subsidy organisation costs" is 100% of the incurred eligible costs that the Executive Council of the Province may limit the aid to a maximum amount and that received revenues are deducted from the grants calculated Cumulation and overcompensation (50) The notified aid scheme contains rules in order to avoid the cumulation of aid. The Dutch authorities have confirmed that it is not envisaged that other government institutions will grant aid to cover the same eligible costs. However, in case unforeseen cumulation would occur, the scheme provides that in case aid is granted under other national or EU schemes or by other authorities to cover the same eligible costs, the amounts to be granted under the present scheme will be limited to the extent that the total sum of the aid under different schemes would not go beyond the real incurred eligible costs, the maximum aid amount under the present scheme, the maximum aid intensities, the maximum aid amount as provided for under the rural development programme, nor beyond the aid amount following applicable European requirements. (51) Furthermore the aid for nature and landscape management is limited to 84% of the standard eligible costs; the remaining must be financed by the nature managers. The aid for organisation costs may be limited by the provincial authorities fixing a maximum amount. Moreover, the exemption of the grants for nature and landscape management from the taxable income does not lead to an overcompensation of the nature management costs, above the maximum aid intensity of 84%. Also, only one type of nature management subsidy under the SVNL can be obtained for a specific area (recital 26). Thus cumulation and overcompensation of aid is excluded and aid will be limited up to maximum applicable aid intensities. (52) The aid scheme also includes provisions as to the eligible costs, the calculation and maximum amounts of aid and aid intensities as described in recitals (24), (25), (26), (38), (39), (48), (49) and (50), which demonstrate the respect of aid intensities and maximum amounts Incentive effect and aid to large enterprises (53) The notified scheme requires that a beneficiary has to submit an aid application, which at least includes the applicants 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 and the eligible costs. The notified scheme 11

12 states that aid for management activities can only be awarded if they have been done after the application for aid has been submitted by the beneficiary to the national authorities. (54) The aid scheme is mainly targeted to small and medium sized enterprises, but does not exclude the granting of aid to large enterprises. The Dutch authorities have confirmed that large enterprises have to describe in the application the situation without the aid and to submit documentary evidence in support of this situation, which will be checked on its credibility by the granting authority Other commitments (55) The Dutch authorities have confirmed that they would publish the information required under point (128) of the Guidelines by the deadline set out in point (131) of the Guidelines ASSESSMENT 3.1. Existence of aid - Application of Article 107(1) TFEU (56) For Article 107(1) TFEU to apply, the scheme must provide an economic benefit to an undertaking which it would not have received in its normal course of business, the aid must be granted to certain undertakings, the benefit must be granted by a Member State or through State resources and the scheme must be capable of affecting trade between Member States. The scheme in question confers an advantage on its recipients i.e. nature managers and farmers in the Netherlands, which perform certain activities. This advantage is granted through State resources in the form of capital grants and an exemption of income tax with regard to the grants received (recitals (48) and (49)). The scheme favours the Dutch agricultural and forestry sector, as well as land managers in general and in particular the beneficiaries of the scheme, which are land managers who perform maintenance activities on their land with regard to nature (recitals (11) and (12)). 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 24. (57) 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 25. The beneficiaries of aid operate in the agricultural and forestry sector where intra- trade takes place 26. The sector concerned is open to The Netherlands have informed that they would like to join the project initiated by the Directorate General for Competition to create an internet based transparency database in order to facilitate Member States to comply with the State aid transparency requirement following points 128 and 129 of the Guidelines. The database will be used for data collection, as well as for data publication. 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. In 2014, Dutch trade with all agricultural products with EU countries for exports amounted to EUR million and for imports to EUR million. Source: European Commission, Agricultural 12

13 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. (58) In light of the above, the conditions of Article 107(1) of the TFEU are fulfilled. It can therefore be concluded that the proposed 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 Lawfulness of the aid Application of Article 108(3) TFEU (59) Although the Dutch authorities have pre-notified the aid scheme before its implementation, the notified amendments have been implemented since 1 January 2014 prior to the notification and before the Commission's approval. Therefore the Netherlands did not comply with its obligation under Article 108(3) TFEU and the aid is unlawful. Nevertheless, the aid may be regarded as compatible with the internal market if one of the derogations provided for in the TFEU applies Compatibility of the aid Application of Article 107(3)(c) TFEU (60) Under Article 107(3)(c), an aid may be considered compatible with the internal market, if it is found 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. (61) For this derogation to be applicable, the aid must fulfil the requirements of the relevant Union State aid legislation. Within the duration of the notified aid scheme from 1 January 2014 until 31 October 2017, both the Community Guidelines for State aid in the agriculture and forestry sector 2007 to (hereinafter: the "Guidelines ") and the Guidelines 2014 to 2020 are applicable for a specified period Application of the Guidelines (62) As regards the notified aid scheme the following Sections of the Guidelines apply to the measures during the periods specified below, pursuant point 735 of the Guidelines 2014 to 2020: technical support pursuant to point 103 of the Guidelines applies to "Subsidy organisation costs" from 1 January 2014 until 31 December 2014 (point 735(a) of the Guidelines 2014 to 2020), 27 Statistics, Member States factsheet-april.2016, Netherlands. Available at: In 2013 in the European Union cubic metres of round wood were produced, out of which around cubic metres were traded between EU Member States. Source: EUROSTAT database, Roundwood production and trade, update from OJ C 319, , p

14 chapter VII of the Guidelines applies to Subsidy for nature management in forest areas from 1 January 2014 until 30 June 2015 (point 735 of the Guidelines 2014 to 2020) Specific assessment of the measure "Subsidy organisation costs" according to the conditions for aid for the provision of technical support to primary producers (63) The "Subsidy organisation costs" previously has been assessed and approved in State aid cases SA and SA with a duration until 31 October 2017 (see footnote 19) on the basis of point 103 of the Guidelines as compatible with the internal market pursuant to Article 107(3)(c). The measure remains unchanged and continued to fulfil the requirements of the Guidelines until 31 December The Commission therefore sees no reason to alter its opinion with regard to the compatibility of the measure with the internal market Specific assessment of the measure nature management in forest areas (64) The aid for nature management activities in forest areas previously has been assessed and approved in State aid cases SA.29568, SA and SA with a duration until 31 October 2017 (see footnote 19) on the basis of the Guidelines as compatible with the internal market pursuant to Article 107(3)(c). It has been concluded that the subsidy nature management which is provided for the conservation of a nature management type in forests can be considered as aid for the forestry sector falling within the scope of point 174 of chapter VII of the Guidelines The measure remains unchanged, except for the notified amendments regarding the introduction of the certificate for nature management and the tax exemption. These amendments do not influence the assessment previously made. The notified amendment of the introduction of a nature certificate positively contributes to a more efficient nature management in forestry areas and to the common objective of the scheme. The support in the form of the tax exemption provides an equal net compensation to the beneficiaries and therefore a larger uptake of the measure. The measure continued to fulfil the requirements of the Guidelines until 30 June The Commission therefore sees no reason to alter its opinion with regard to the compatibility of the measure with the internal market Application of the Guidelines (65) As regards the notified aid scheme the following Sections of the Guidelines are applicable from 1 January 2015 ("Subsidy organisation costs"), respectively 1 July 2015 (nature management in forestry areas) until 31 October 2017: Section "Aid for knowledge transfer and information actions" with regard to the measure "Subsidy organisation costs", Section Aid for specific forest actions and interventions with the primary objective to contribute to maintaining or to restoring forest ecosystem and biodiversity or the traditional landscape", with regard to nature management in forest areas, 14

15 Section Aid for maintaining and improving the soil quality and ensuring a balanced and healthy tree growth in the forestry sector, with regard to nature management in forest areas and Section "Aid for restoration and maintenance of natural pathways, landscape elements and features and natural habitat for animals in the forestry sector, with regard to nature management in forest areas. (66) It follows from point 290 of the Guidelines that the Commission will consider aid for knowledge transfer compatible with the internal market under Article 107(3)(c) TFEU if it complies with the common assessment principles of the Guidelines, with the general conditions for technical support and with the conditions set out in Section of Part II of the Guidelines. (67) It follows from point 594 of Section of the Guidelines that the Commission will consider other aid for specific forest actions and interventions with the primary objective to contribute to maintaining or to restoring forest ecosystem and biodiversity or the traditional landscape, compatible with the internal market under Article 107(3)(c) TFEU if it complies with the common assessment principles of the Guidelines and the common provisions applicable to Section 2.8 of Part II of the Guidelines. (68) It follows from point 595 of the Guidelines that the Commission will consider aid for maintaining and improving the soil quality and ensuring a balanced and healthy tree growth in the forestry sector compatible with the internal market under Article 107(3)(c) TFEU if it complies with the common assessment principles of these Guidelines, the common provisions applicable to Section 2.8 of Part II of these Guidelines and with the conditions set out in Section of Part II of the Guidelines. (69) It follows from point 599 of the Guidelines that the Commission will consider aid for restoration and maintenance of natural pathways, landscape elements and features and natural habitat for animals in the forestry sector compatible with the internal market under Article 107(3)(c) TFEU if it complies with the common assessment principles of these Guidelines, the common provisions applicable to Section 2.8 of Part II of these Guidelines and with the conditions set out in Section of Part II of the Guidelines Common Assessment Principles (70) In conformity with points 43 and 44 of the Guidelines, the notified scheme aims to promote the competitiveness of agriculture and the sustainable use of natural resources in order to achieve intelligent and sustainable growth in the Dutch agricultural sector by providing technical assistance to farmers carrying out agrienvironment-climate operations on agricultural land. The nature management measures under the current scheme contribute to a well-defined objective of common interest of restoring and maintaining biodiversity in nature and forestry areas. Thus contributing in particular to restoring, preserving and enhancing ecosystems in accordance with point 10 of the Guidelines (recitals (4) to (6) and (87)). (71) In line with point 52 of the Guidelines, the Dutch authorities assess the environmental impact of the scheme, demonstrating that the aid scheme does not result in an infringement of the applicable Union environmental protection 15

16 legislation. The Dutch authorities have confirmed that nature management activities will not have a negative impact on the environment and that the new agricultural activities will comply with all relevant national and European environmental requirements. Rather, the activities promoted by the aid scheme contribute prominently to the desired environmental and nature objectives. (72) According to points 53 and 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 show this, Member States have first to identify the problem. (73) The Dutch authorities have stated that on grounds of market failure the measures of the scheme at hand need State intervention for stimulating nature maintenance activities. Because of low income and high costs in relation to environmental activities, nature conservation and recovery, State support is required in order to encourage farmers and land managers to take part in the measures of the scheme at hand, thus contributing to activities that make a positive contribution to the environment and climate, to nature recovery and conservation (recital (6)). (74) According to 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 these Guidelines. Therefore, such aid should be considered necessary to achieve the objectives of common interest specified under Section 3.1 of Part I of these Guidelines. The aid with regard to organisation costs and forestry activities under the current aid scheme fulfils the specific conditions laid down in Sections , 2.8.1, and of Part II of the Guidelines, as shown below, when the land managers are farmers or forest land holders and therefore point 55 of the Guidelines is complied with. The nature management activities also need State intervention to encourage the nature land managers to perform these activities in a sufficient and coherent manner, in order to attain the environmental objectives (recitals (7), (76) and (87), which the market cannot deliver by its own and therefore by analogy point 54 of the Guidelines is complied with regarding these activities and beneficiaries (see section ). (75) 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 and if the aid fulfils the specific conditions laid down in the relevant Sections of Part II of the Guidelines. The Dutch authorities have informed that other potentially less distortive forms of aid do not exist at the moment (recital (26)) and that the specific aid form with regard to the organisation costs and forestry activities is in line with the specific requirements of Sections , 2.8.1, and (see sections to below) of Part II of the Guidelines. The Commission therefore considers the aid instrument for these measures appropriate. The nature management measures are carried out by the land managers in accordance with the nature management plans established by the public authorities (recital (17)), in order to develop a coherent nature management structure to keep biodiversity at an acceptable level. The payments for the activities are granted on the basis of standard costs and calculated for each predefined nature type and landscape type (recital (24)), in such a manner to avoid overcompensation and cumulation of aid (recitals (26), (50) and (51)). In this way it is ensured that the grants reflect the required efforts from the land 16

17 managers and the costs incurred. Therefore, it can be concluded that the State aid constitutes an appropriate instrument and form of aid to the needs of the scheme in order to achieve its environmental objective. (76) According to 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 that, in the absence of the aid land managers would rather be hesitant to undertake nature maintenance activities (recital (7)), the State intervention has an incentive effect. (77) According to points 70 and 71 of the Guidelines, the project should not start prior to the aid application to the national authorities and this application has to comprise at least the name of the applicant, its size, a description and location of the project, the duration, the aid needed and the eligible costs. As described in recital (53), the conditions set out in points 70 and 71 of the Guidelines regarding the incentive effect are met. (78) According to points 72 and 73 of the Guidelines, large enterprises must describe in the application the situation without the aid and the granting authority has to carry out a credibility check of this counterfactual scenario. As described in recital (54) these conditions are fulfilled. (79) Pursuant to point 84 of the Guidelines, proportionality requirements are fulfilled if the calculation of the eligible costs is in line with the specific conditions set out in Part II of the Guidelines and the maximum aid intensities for the type of aid are respected. As shown in the sections below, the calculation of the eligible costs and the aid intensities with regard to the organisation costs and forestry activities of the scheme at hand comply with these conditions. Pursuant to point 82 of the Guidelines, in principle, in order for the aid to be proportionate the Commission considers that the aid amount should not exceed the eligible costs. With regard to the nature management activities the Dutch authorities have submitted detailed calculations showing that the aid amount does do not exceed the eligible costs (recital (26)). The aid amounts for the nature management activities are fixed on the basis of standard assumptions of the additional costs. All elements contained are verifiable, based on figures established by appropriate expertise indicating clearly the source, are differentiated to take account of particular circumstances of the type of management of the land, concern costs for maintenance activities and do not contain investment costs (recitals (24) and (25)), by analogy in accordance with the requirements of point 93 of the Guidelines. The notified aid amounts are therefore deemed to be correctly calculated, justified and in line with points 82, 84, 85 and 93 of the Guidelines, according to which, if the eligible costs are correctly calculated and the maximum aid intensities and aid amounts are respected, the aid is to be considered proportionate. The compensation is in proportion in order to achieve the (long term) common objective of a positive effect on the environment (point 81 of the Guidelines). Therefore, the aid for the measures of the scheme is considered proportional to the needs of the scheme in order to achieve its environmental objectives. (80) Points 99 and 100 of the Guidelines contain rules on cumulation of aid. The notified aid scheme contains rules in order to avoid the cumulation of aid. The 17