On 15 July 2022, in response to the rise in energy prices caused by the war in Ukraine on the one hand, and to the push for stronger environmental protections on the other, Luxembourg adopted three new State aid regimes to support undertakings based in the country.
The first two regimes help undertakings impacted by the long-running conflict in Ukraine, in particular those affected by the rise in energy prices.
The third regime is being run in connection with the greenhouse gas emissions allowance trading system for the period 2021 to 2030. It is in line with the EU industrial strategy to decarbonise energy-intensive sectors and with the EU greenhouse gas emissions trading system. This emissions trading system (“ETS”) State aid scheme will join the existing State aid measures in the environmental field included in the law of 15 December 2017.
1. state aid schemes supporting undertakings in the context of the war in ukraine
On 23 March 2022, the Commission adopted a Temporary Crisis Framework (“TCF”) for State aid measures to support the economy following the aggression against Ukraine by Russia.
The TCF provides specific criteria for assessing the compatibility with the internal market of State aid measures taken by Member States to remedy the economic effects following (i) Russia’s aggression against Ukraine and (ii) the sanctions imposed by the EU and international partners and the counter-measures taken.
Luxembourg has adopted the following laws as part of the TCF:
Law on the implementation of a State aid regime in the form of guarantees in favour of the Luxembourg economy following the aggression against Ukraine by Russia
Law on the implementation of a State aid regime for companies particularly affected by the rise in energy prices
a) State aid in the form of guarantees for the Luxembourg economy
This law aims to alleviate the liquidity needs of Luxembourg-based companies affected by the economic consequences of the military aggression in Ukraine, by creating a system of State guarantees (“Guarantees”) on new loans granted by banks headquartered in Luxembourg between 1 May 2022 and 31 December 2022.
Beneficiaries: all undertakings except for: (i) those under collective insolvency proceedings; (ii) real estate; (iii) those whose main activity is holding shares in other companies; (iv) those subject to restrictive measures and (v) those that have been sanctioned twice or more for breach of provisions on illegal employment.
Eligible costs: a Guarantee can cover investment loans and working capital loans with a maximum duration of six years. The maximum amount of loans eligible for a Guarantee is: (i) 15% of the average total annual turnover achieved by the company during the last three full financial years or (ii) 50% of the company’s energy costs during the 12 months preceding the month in which the credit institution notified the State Treasury of its intention to grant a loan under a Guarantee. Unless it is called in earlier following a credit event, the Guarantee covers 90% of the remaining capital of the loan until maturity, provided that losses are shared proportionally under the same conditions between the State and the credit institution.
Budget: the total budget for the planned Guarantees may not exceed EUR 500 million.
A credit institution wishing to grant a loan under the Guarantee must notify the State Treasury of this fact, and must grant the loan by 31 December 2022.
b) State aid scheme for companies affected by the rise in energy prices
The law provides for two schemes of aid for companies: (i) energy-intensive companies of any size, in any sector, facing a severe increase in the price of natural gas and electricity and (ii) companies in the road haulage, construction and food processing sectors that are making losses and whose economic viability is jeopardised by the increase in the price of the fuel they need for journeys and deliveries.
Aid to large energy-consuming enterprises covering part of the extra costs of natural gas and electricity
Beneficiaries: large energy-consuming enterprises whose purchases of energy products and electricity amount to at least 3% of production value.
Eligible costs: monthly extra costs of natural gas and electricity borne by the undertaking that exceed twice the average cost per unit of natural gas and electricity borne by the undertaking during the reference period. Aid covers 30% of eligible costs.
Budget: may not exceed EUR 2 million per undertaking.
Aid to undertakings in certain sectors to cover part of the additional costs of diesel
Beneficiaries: (i) road freight transport companies and (ii) enterprises in the craft sector falling under groups “1- food” and “4- construction”.
Eligible costs: monthly additional costs for diesel borne by the company that are at least 25% above the average cost per unit of diesel borne by the company during the reference period. The company must suffer operating losses of which the eligible costs represent at least 50% during the relevant month of the eligible period (e. February to December 2022). Aid covers 50% of eligible costs.
Budget: up to 80% of the company’s operating losses. The total amount of aid for the eligible period may not exceed EUR 400,000 per undertaking.Both regimes allow aid grants to be issued until the end of 2022. For each month of the eligible period, the undertaking must apply for aid by 30 September 2022 (for the months February to June 2022) or by 9 December 2022 (for the remaining months).
2. ets state aid scheme for the period 2021 to 2030
The law introducing the ETS State aid scheme is intended to cover part of the costs of indirect emissions of companies in electricity-intensive sectors and sub-sectors for the years 2021 to 2030, with a total budget of EUR 500 million.
In particular, the ETS State aid scheme aims to mitigate the risk that companies will relocate production to countries with laxer environmental protections or replace products with more carbon-intensive inputs. This State aid may be granted under the following conditions:
Beneficiaries: undertakings exposed to a genuine risk of carbon leakage due to their sector, such as the manufacture of leather clothes, inorganic basic chemicals, pulp, paper, basic iron, steel or refined petroleum products, or the production of copper, aluminium, etc.
Eligible costs: costs of indirect emissions borne by the beneficiaries, e. costs they incur because the costs of greenhouse gas emissions are passed on in the price of their electricity.
Amount: aid covers up to 75% of eligible costs per beneficiary during the financial year.Certain prerequisites apply to undertakings with energy consumption above 3 GWH per year. Notably, they must carry out an energy audit and adopt decarbonisation measures by investing in projects to reduce greenhouse emissions.
Note that requests for aid can be submitted either in the year following the one for which it is needed (by 15 November 2022 for 2021, and thereafter by 31 March) or in the same year (by 30 September for 2022, and thereafter by 31 March).
This communication, which we believe may be of interest to our clients and friends of Arendt, is for general information only. It is not a full analysis of the matters presented and should not be relied upon as legal advice.
 Loi du 15 juillet 2022 visant à mettre en place un régime d’aides sous forme de garanties en faveur de l’économie luxembourgeoise à la suite de l’agression de la Russie contre l’Ukraine, Mémorial A no. 357/2022.  Loi du 15 juillet 2022 visant à mettre en place un régime d’aide aux entreprises particulièrement touchées par la hausse des prix de l’énergie causée par l’agression de la Russie contre l’Ukraine, Mémorial A no. 412/2022.
 For definitions, see the Grand-Ducal regulation adopted in execution of Article 12 of the amended law of 2 September 2011 regulating access to the professions of craftsman, trader, industrialist and certain liberal professions.  Loi du 15 juillet 2022 instaurant un régime d’aide dans le contexte du système d’échange de quotas d’émission de gaz à effet de serre pour la période 2021-2030, Mémorial A no. 356/2022.
 Sectors listed at the Annex I of the Guidelines on certain State aid measures in the context of the system for greenhouse gas emission allowance trading post-2021 (2020/C 317/04).