EU eyes green conditions on state aid to virus-hit firms

While some EU countries like France have decided to impose green conditions on support to troubled airlines, others have not – and there is currently no obligation for them to do so. [EPA-EFE/CHRISTOPHE PETIT TESSON]

An imminent revision of EU state aid rules for troubled firms during the COVID-19 outbreak could either uphold the bloc’s climate goals or descend into “greenwashing”, a senior EU lawmaker has warned.

The European Commission is expected to unveil its new emergency state aid rules in the coming days, allowing national governments to pump billions into ailing companies and save them from bankruptcy.

The Commission suspended its normally-strict state aid rules in mid-March, approving so far more than €1.9 trillion worth of national schemes during the pandemic.

But the EU executive is still undecided on whether to make aid conditional to climate and environmental objectives of the European Green Deal.

The revised state aid rules “is a fundamental test for the European Union’s ability to deliver on its climate ambitions” while preserving the EU single market, said Pascal Canfin, a French lawmaker who chairs the European Parliament’s environment committee.

Germany accounts for 52% of the total aid approved by the European Commission so far, prompting concerns that countries with the deepest pockets are getting an unfair advantage from the EU single market during the crisis.

Commission President Ursula von der Leyen has acknowledged those risks, saying the “huge differences” in aid to troubled firms risked deepening economic disparities within the 27-member bloc.

“This difference will have massive effects on the level playing field unless we counter-balance that,” von der Leyen said after an EU summit last month where state aid was one of the contentious issues up for discussion.

Germany gains most from relaxed EU state aid rules

Germany accounts for more than half of the emergency coronavirus state aid approved by the EU executive, prompting concerns that countries with the deepest pockets might be getting an unfair advantage in the bloc’s single market.

The Commission has defended its emergency aid regime, saying Germany’s massive use of state aid could act as “a locomotive” for the EU’s economy in the recovery phase.

But while some member states have decided to impose green conditions on support to troubled firms, others have not. Air France for instance was told to cancel domestic flights that come in competition with rail under the terms of a bailout deal agreed last week with the French government.

In fact, there is currently no obligation on EU governments to impose green conditions on bailout cash offered to ailing companies.

“It is up to member states to decide if they wish to grant state aid” and align those with policy objectives such as the Green Deal and digital transformation of their economies, an EU Commission spokesperson told EURACTIV.

‘Repayment schedule’ and ‘conditions’

The revision of EU state aid rules seeks to change this but it is still unclear whether green conditions envisaged in the revised temporary aid regime will have teeth or not.

The draft proposal, seen by EURACTIV, foresees an “exit strategy” for beneficiary companies, including a “repayment schedule” to be vetted by the European Commission’s competition department, headed by Margrethe Vestager.

Beneficiaries would have to report on the implementation of the repayment schedule and on their “compliance with the conditions” within 6 months of receiving the aid, and every semester thereafter, the draft says.

When it comes to green conditions, the Commission will “assess whether the actions contemplated in the restructuring plan ensure the viability of the beneficiary, also with a view of EU and national obligations linked to the green and digital transformation,” says the draft text.

But according to Canfin, the Commission has yet to decide what course of action it will take, with two options currently on the table:

  • “A weak one” asking EU countries to merely stick to climate and environmental commitments when supporting ailing companies.
  • A second option, requiring governments to sign “green transition pacts” with companies receiving bailout cash.

According to Canfin, the first option would weaken the EU single market and “increases the risk of greenwashing” while the second option is the only one that’s consistent with the EU’s climate objectives and the Paris Agreement.

“Today, this choice and the future of the European single market and of the real implementation of the Green Deal lies in the hands of Frans Timmermans and Margrethe Vestager,” Canfin said, referring to the two Commission vice-presidents respectively in charge of the Green Deal and competition portfolios.

“The European Commission cannot present a state aid temporary framework without a green transition pact for large companies receiving state aid if we want to maintain a strong and healthy European single market, and succeed in our ambition of becoming the first ever carbon neutral continent,” Canfin said.

“Let’s put our words into action and not fail this test.”

Questions remain over green aspects of EU recovery plan

EU leaders on Thursday (23 April) tasked the European Commission with drafting a trillion-euro “recovery fund” linked to the EU budget but didn’t specify how it will support the green transition they claim to be committed to.

> Read the full text of the proposal below or download here.

State_aid_COVID

[Edited by Benjamin Fox]

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