What is an IPCEI and how does it work?

Important Projects of Common European Interest (IPCEIs) are one of the European Union’s main instruments for promoting major strategic projects which, because of their complexity, level of risk or investment requirements, would be difficult to develop solely through private financing or the action of a single Member State. They are large-scale integrated projects that bring together companies, research centres, public authorities and other stakeholders from several Member States with a common goal: to develop innovative technologies or cross-border infrastructure capable of strengthening European competitiveness and addressing strategic challenges facing the EU.

IPCEIs were created to address significant market failures or systemic challenges that prevent certain investments from going ahead through private initiative alone. In these cases, public support acts as a catalyst for implementing projects that benefit all 27 EU Member States and would probably not be carried out without such support. Beyond the results achieved by participating companies, IPCEIs therefore help to strengthen the competitiveness of European industry, promote the Union’s open strategic autonomy and accelerate both the green and digital transitions. They also support the development of strategic European value chains and the creation of industrial ecosystems capable of competing globally.

What are the main requirements for an IPCEI?

For a project to qualify as an IPCEI, it must meet several conditions established by the European Commission. These include:

• making a clear contribution to one or more of the EU’s strategic objectives;
• addressing a significant market failure or systemic challenge that justifies public intervention;
• integrating complementary projects carried out by participants from several Member States, normally at least four;
• being designed in an open, transparent and inclusive manner, giving all Member States a genuine opportunity to participate from the initial stages;
• generating benefits that extend beyond the participating companies and the countries directly involved, producing positive effects for the European economy as a whole;
• demonstrating a high degree of innovation or, in the case of infrastructure, delivering exceptional strategic value for the EU;
• including a significant contribution from private financing, so that public aid complements companies’ investment efforts and covers only the needs arising from the project.

How is aid granted for an IPCEI?

IPCEIs are a State aid instrument. They are financed from national budgets and must be assessed and authorised by the European Commission to ensure their compatibility with the internal market. Public support is not granted automatically, nor does it fund every type of investment. Its purpose is to make viable projects that, because of their high technological, financial or industrial risk, would be unlikely to proceed without public support. To this end, the European Commission assesses each IPCEI against four principles, among others.

• Necessity: the aid must be essential for the project to go ahead.
• Proportionality: public support must be limited to the minimum amount required to cover the project’s funding gap, thereby preventing overcompensation.
• Appropriateness: the aid must be the most suitable instrument for achieving the intended objectives.
• Competition: public intervention must not cause undue distortions of competition or adversely affect trade between Member States in a manner contrary to the common interest.

Depending on the characteristics of the project and the funding gap identified, the aid intensity may cover up to 100% of eligible costs, provided that this is duly justified under the applicable rules.

How is an IPCEI prepared?

Developing an IPCEI is a complex process that requires close coordination between the participating Member States, the European Commission and the companies concerned. Although each project has its own particular features, the procedure generally follows a series of common stages.

First, one or more Member States identify a strategic challenge or significant market failure that justifies launching an IPCEI. The project design phase then begins, during which the value chain, the scope of the IPCEI and its intended objectives are defined.

Each Member State subsequently selects the companies that will participate in the project through national procedures, usually calls for expressions of interest or equivalent mechanisms. During this stage, the proposals received are assessed and the individual projects that will make up the IPCEI are developed.

Once the project has been defined, the Member States and the European Commission work together during the pre-notification phase. At this stage, they analyse the structure of the IPCEI, review compliance with the criteria established by the applicable rules and resolve any technical or legal issues before formal notification.

Finally, the Member States notify the project to the European Commission, which assesses its compatibility with State aid rules and adopts the corresponding decision. The entire process may take several months.

What rules govern IPCEIs?

IPCEIs are governed by EU State aid rules, specifically Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU), which allows aid to be authorised where it promotes the execution of an important project of common European interest.

To establish a specific framework for this type of project, the European Commission published its first Communication in 2014 setting out the criteria for analysing the compatibility with the internal market of State aid intended to promote the execution of IPCEIs.

In November 2021, Brussels adopted a new Communication, which entered into force on 1 January 2022. It replaced the previous framework and adapted the instrument to the EU’s new industrial and strategic priorities.

The main changes introduced include:

• strengthening the European dimension of projects by encouraging the participation of a greater number of Member States;
• requiring IPCEIs to be designed in an open, transparent and inclusive manner;
• promoting the participation of small and medium-sized enterprises;
• placing greater emphasis on innovation, the green and digital transitions and the strengthening of strategic European value chains.

This revision has helped to consolidate IPCEIs as one of the European Union’s main industrial policy instruments for supporting the development of strategic technologies and infrastructure.