| Author (Person) | Nicolaides, Phedon |
|---|---|
| Publisher | Taylor & Francis |
| Series Title | European Competition Journal |
| Series Details | Volume 10, Number 1, Pages 155-165 |
| Publication Date | January 2014 |
| ISSN | 1744-1056 |
| Content Type | Journal Article |
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Introduction: "The main purpose of this short article is to demonstrate that in certain cases it is surprisingly easy to derive a measure of benefits and costs. If social gains outweigh costs, then state aid is economically rational. This kind of analysis is very timely because the Commission is currently in the process of revising its environmental guidelines for the period 2014–20. This article outlines the kind of compatibility assessment that should be incorporated, where possible, in those guidelines. The second purpose of the article is to examine a problem related to the rationality of state aid: why the recipients request aid. This may be thought of as the private rationality of state aid. If the positive effects of state aid outweigh the negative ones, then state aid is socially desirable. It is then automatically presumed that state aid is good for those that receive it. That is, stat aid is privately rational. But this is not always the case. In particular, environmental aid is limited to a certain percentage of “eligible” costs. These costs are always lower than the total expenditure. This immediately raises the question whether the recipients of environmental aid obtain any advantage. This article identifies at least one case where the answer is in the affirmative. The article examines the case of exemption from environmental taxes. Here, though, there is a third puzzle. If such taxes are intended to protect the environment from harmful activities, how is it possible that exemptions or reductions from those taxes can contribute to improved environmental conditions? The typical answer is that without the exemption it would be difficult to implement the full tax. This is an answer that is rarely backed up by robust evidence. However, the case which is used in this article provides an example where it is possible to derive quantifiable evidence.
In order to facilitate the exposition of the various possible effects of state aid, the analysis in this article is based on an actual case that has recently been assessed by the Commission. The case concerns a Dutch exemption from environmental charges that has been found by the Commission to constitute compatible state aid. First, though, the next section explains in more detail why it is not obvious that recipients of environmental aid obtain net benefits."
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| Source Link | https://doi.org/10.5235/17441056.10.1.155 |
| Subject Categories | Environment, Internal Markets |
| Keywords | State Aid |
