A Quiet Shift in EU Tax Governance: Summary and Reflections on Furuseth’s ‘Green Transition’ Article

Reviewed article

• The Green Transition: Tax Incentives and State Aid by Eivind Furuseth

In his article¹ “The Green Transition: Tax Incentives and State Aid”, Furuseth discusses an increasingly important legal question in EU economic governance: How much can Member States use tax policy to support the green transition, and to what extent is this space shaped — or limited — by the European Union’s framework on state aid?

Furuseth begins by recognizing the scale of the climate challenge. The EU’s goal to reach climate neutrality by 2050 requires massive investments, far exceeding what public funds can provide. As a result, Member States are increasingly relying on tax incentives to encourage private investment in renewable energy, clean technologies, and green innovation.² However, as he rightfully points out, tax incentives are not beyond the reach of state aid rules. On the contrary, when they benefit certain businesses, sectors, or activities over others, they are regarded as selective advantages under Article 107(1) TFEU and need to be evaluated accordingly.³

What makes Furuseth’s article especially insightful is his focus not just on the mechanics of classification, but on how the legal interpretation of compatibility under Article 107(3) TFEU is beginning to change. He demonstrates that while tax incentives are often scrutinized for their selectivity, the key legal development is the increasing integration of environmental objectives into the compatibility analysis. Citing recent case law — most notably Case C-594/18 P Austria v. Commission (Hinkley Point C) — he highlights the growing acceptance of environmental protection as a legitimate public interest that can offset concerns about distortion. Under this interpretation of the CJEU, the balancing test no longer focuses solely on competition but also considers the proportionality and necessity of the aid in meeting climate goals. Tax measures that are well-targeted, limited in duration and scope, and aligned with broader EU objectives are thus more likely to be considered compatible, not automatically but through a structured, policy-aware legal review.

Another important aspect discussed in the article is the role of the General Block Exemption Regulation (GBER), which serves as the legal foundation for exempting specific aid categories from prior notification under Article 108(3) TFEU. Furuseth clarifies that the GBER is not a free license to act, but a technical simplification grounded in detailed legal criteria. It originates from Article 108(4) TFEU, which empowers the Commission to identify aid that is presumed compatible, provided it meets specific conditions. The 2023 update of the GBER, which Furuseth analyzes thoroughly, aligns with a broader policy shift towards supporting green investments, especially in energy transition, hydrogen production, and decarbonization.⁴ He rightly emphasizes that this does not constitute a deregulatory move; member states must still adhere to the specific legal and technical standards, and any non-compliance triggers the need for notification. Therefore, while the GBER helps streamline implementation, it does not remove oversight.

When it comes to the interface between tax incentives and innovation policy, Furuseth draws attention to the updated 2022 RDI Framework, which plays an important role in shaping the Commission’s approach to aid for research, development, and innovation. Rather than claiming that tax incentives escape scrutiny if they are “technology-neutral,” the RDI Framework, combined with the GBER, appears to have created more structured legal pathways for environmental R&D support. This is particularly relevant for Member States seeking to stimulate green technologies without triggering excessive concerns about selectivity.

In general, Furuseth’s analysis traces how EU state aid law is gradually recalibrated to accommodate climate objectives. Green tax incentives are no longer viewed solely through the lens of market distortion; instead, their compatibility with the internal market is now assessed through a broader balancing test that includes environmental aims. Instruments like the GBER and RDI Guidelines reflect this shift — not as signs of deregulation, but as part of a more structured and conditional form of regulatory alignment. While this may grant Member States some operational leeway, it does so within predefined EU priorities and frameworks.

Interestingly, this raises important structural questions. If tax incentives must increasingly meet detailed European “suggestions” — whether through notification procedures or GBER compliance — the line between formal harmonization and real convergence starts to blur. The structure of EU state aid law, as it is developing, may maintain formal sovereignty over tax policy. Still, it conditions the use of that sovereignty on adherence to Union-wide strategic and legal frameworks. In doing so, it reshapes the space in which Member States can independently craft their fiscal responses to environmental and economic challenges.

What makes this development so significant is precisely its subtlety. There is no treaty revision, no overt transfer of powers, no open challenge to the principle of national sovereignty in tax matters. Instead, centralization progresses gradually — through delegated regulations, evolving interpretive practices, and an increasingly complex network of compatibility expectations. Like a Trojan horse, state aid control has become the legal vehicle through which national tax measures are subtly elevated to the European level. While ostensibly promoting fair competition, it quietly bypasses the CJEU’s core reasoning on Member States’ exclusive tax autonomy⁵ and redefines the contours of domestic fiscal sovereignty from within.⁶ As national tax incentives are increasingly shaped by climate goals, and legal compliance comes to hinge on anticipating the Commission’s evolving approach, the formal notion of fiscal sovereignty risks losing its practical substance.

Overall, Furuseth’s article opens up a broader constitutional question: Is the push for a greener economy in the EU coming at the expense of a quieter, procedural loss of national fiscal independence? The legal structure might stay decentralized; the practical reality, more and more, does not — a development that clearly deserves further analysis. But even if that is the case, is this a trade-off we have to accept given the urgency of the climate crisis?

¹ E. Furuseth, “The Green Transition: Tax Incentives and State Aid” (2025) 53(3) Intertax 222.
² Cf. Foo Yun Chee, “EU eases state aid rules to boost green projects, cut carbon footprint” (Reuters, 25 June 2025) available online at accessed 17 Juli 2025.
³ Cf. Furuseth, “The Green Transition: Tax Incentives and State Aid” (2025) 53(3) Intertax 222 (225).
⁴ Cf. Ibid at Fn. 2.
⁵ In Judgment of the Court of Justice of 8 November 2022, Fiat Chrysler Finance Europe (Joined Cases C‑885/19P and C‑898/19P, EU:C:2022:859), Judgment of the Court of Justice of 5 December 2023, Engie (Joined Cases C‑451/21P and C‑454/21P, EU:C:2023:948) and Judgment of the Court of Justice of 14 December 2023, Amazon (C-457/21P, EU:C:2023:985) the underlying logic of the CJEU was that Member States have the exclusive right to define their own corporate tax systems, and the Commission is generally required to respect national tax laws and their objectives.
⁶ Cf. Dimitrios Kyriazis, “The European Commission, Fiscal State Aid and its Incursion into Member States’ Tax Autonomy” (2025) 26(2) Business Law International 91.

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