Substantive incentive effect. (32) The Hungarian authorities invoke a scenario 2 situation (location decision) under paragraph 61(b) of the RAG 2014, to demonstrate the existence of a substantive incentive effect (24). They argue that, without the aid, the investment would have taken place in Türkiye (Eskişehir) because it would have been more profitable (higher NPV of the investment) to invest in that Turkish location as compared to the Hungarian location.
Substantive incentive effect. (121) As there are many valid reasons for a company to locate its investment in a certain region, even without any aid being granted, the RAGs require the Commission to verify in detail that the aid is necessary to provide a substantive incentive effect for the investment that can be proven in two possible ways (see paragraph 61 of the RAG 2014 and paragraph 59 of the RAG 2022), that is to say that the aid: gives an incentive to invest in the area concerned because otherwise the investment would not be sufficiently profitable for the aid beneficiary (59) (scenario 1, investment decision), or gives an incentive to locate a planned investment in the area concerned rather than elsewhere because it offsets the net disadvantages and costs of investing in a location in the area concerned (scenario 2, location decision).