Is Sustainable Development Compatible with EU State Aid Law?

Jeppe Rosenbeck Holmen & Luca Miceli

Student thesis: Master thesis


The purpose of this thesis is to examine whether European state aid law is compatible with the EU’s goal of sustainable development. Sustainable development has gained significant attention from international organizations, which, among others, include the UN and the EU. Thus, the UN has introduced an agenda for 2030 that includes 17 sustainable development goals, and the EU has announced its commitment of leading the way to fulfill these goals.
As a mean for the EU to achieve this goal, it is analyzed if a member state’s implementation of a generous tax scheme for employees in small and medium-sized enterprises that engage in sustainable development activities is in accordance with EU state aid law and if it is economically efficient. Given the lack of harmonization on the area of direct taxation within the Union, Denmark is used as country for reference.
After having determined how such a tax scheme should be designed, a thorough analysis of the scheme’s compliance with the state aid legislation is set down by using case-law from the Court of Justice. As the conclusion is that the tax scheme is contrary to TFEU art. 107(1), it is necessary to include considerations the can justify the (unlawful) state aid. However, such considerations entail economic aspects, why these are subsequently evaluated in the thesis’ economic analysis.
From an economic point of view the tax scheme is examined by using economic theory in order to investigate the effects on the agents within the single market. It is found that it is attractive for the EU to promote sustainable development activities in SMEs, as the EU can profit from this in the long run. On the other hand, a tax incentive scheme for employees causes a risk of unintended competition between the member states that is not desirable.
Given the above findings, it can be concluded that there are positive effects from promoting sustainable development, however, the state aid legislation is to some extent preventing the member states from doing so. Therefore, the EU must ask itself if it is willing to compromise the negative effects in the short run in order to profit as a sustainable frontrunner in the long run

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2020
Number of pages97
SupervisorsYvette Lind