EU urges national governments to take the lead on ‘green’ state aid

"If an airline goes to national authorities and asks for support, I think it is legitimate to ask: 'What are you going to do for society in return?" said Frans Timmermans, the EU Commission vice-president in charge of the European Green Deal. [© European Union 2020 - Source: EP]

The European Union’s top climate official encouraged governments on Monday (11 May) to attach green conditions to public support for coronavirus-hit companies, after the bloc’s executive opted not to do so at the EU level.

The European Commission, which approves state support schemes, updated its temporary rules on Friday for firms receiving government aid during the pandemic.

The new rules ban dividends, share buybacks and bonuses for bailed-out companies, for so long as the state holds a stake in them.

But they stopped short of attaching climate-related conditions to EU approvals of state aid – despite calls from lawmakers and green groups to do so – instead leaving it to national governments to choose to add “green strings” to bailouts.

EU decides: No green strings attached on cash to virus-hit firms

Large companies receiving emergency cash during the COVID-19 crisis will have to report on how they use taxpayer money but won’t be obliged to spend on greening their operations, under new EU rules published yesterday (8 May).

“If an airline goes to national authorities and asks for support, I think it is legitimate to ask: ‘What are you going to do for society in return? Are you going to put a cap on bonuses? Are you going to stop paying dividends? Are you going to lower your carbon footprint?'” EU Climate Commissioner Frans Timmermans said in a video call with lawmakers on Monday.

The EU executive has said its “Green Deal” plan to cut net EU greenhouse gas emissions to zero by 2050 will guide the bloc’s economic recovery.

But it has proved unwilling to use state aid rules – which are designed to avoid distortions of competition – to link countries’ support schemes to climate goals.

EU competition regulators said the current objective was to help virus-hit companies cope with liquidity and solvency issues.

Under its revised temporary state aid framework, unveiled on Friday, large firms must report on how they use public funds in line with the EU’s green goals. The framework does not require firms to use state funds to become greener, or oblige governments to attach climate conditions to support.

Member states are “free to design national measures in line with additional policy objectives” such as climate aims, the Commission said.

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

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.

Luxembourg Energy Minister Claude Turmes said on Monday that a lack of European coordination could mean some countries’ efforts to attach green strings to bailouts were undermined by states that did not.

“We are organising a distortion of the internal market of a magnitude never seen,” he told a EURACTIV online event, pointing to airline bailouts as an area where that could occur.

The Commission has already signed off on €1.9 trillion in state support schemes for companies during the pandemic. Among those are a €7 billion package of public and state-backed loans from the French government to Air France, which Paris has said will require the airline to cut its carbon emissions.

Germany’s Lufthansa is among the carriers still negotiating government support. Berlin has not confirmed whether the deal will include climate conditions, but a government source told Reuters that firms would need to contribute to sustainability to receive public funds.

“We are going to demand this,” he said.

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.

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