European Union state aid regulators approved 20.5 million euros ($27.73 million) in French support for Renault to develop diesel hybrid technology that will cut CO2 emissions from commercial vehicles.

Renault will equip the Trafic and Master ranges with a new diesel hybrid engine as part of the project, the European Commission said.

The Commission said the French state aid, which consisted of 3.8 million euros in grants, 3.4 million euros for industrial research and 13.1 million euros for experimental development, was in line with EU rules.

“The diesel consumption and CO2 emissions for these two models will be reduced considerably. The state aid addresses a genuine market failure without giving rise to an undue distortion of competition,” the statement said.

This is the third state aid case approved by the Commission to support r&d activities for new hybrid engines. Renault is the first aimed at commercial vehicles, while the previous French aid was to PSA/Peugeot-Citroen and Valeo for passenger car engines.

Renault will carry out its project in collaboration with Continental, Valeo and LMS International, and the IFPEN research body.