Brussels promotes green investment and adapts its competition policy

• Eu reforms its state aid rule to boost green investment
• EU countries will have until 2024 to adapt to the new guidelines

In the transformation of the economy to achieve climate neutrality in Europe by 2050 every euro counts, that is why the European Commission presented last Tuesday a reform of the competition rules that regulate state aid that aims to boost public investment in green policies. “Competition rules are not at the forefront of the fight against climate change, but there is a broad consensus that they play a very important supporting role,” explained the European Commission’s Executive Vice-President for Competition, Margrethe Vestager, “what we decide to fund from the public purse is really important, for better or for worse. The new guidelines approved today try to increase the good and limit the bad,” he added.

These new guidelines will replace the current ones and will be in force from the beginning of next year, although the countries of the European Union will have until 2024 to adapt. The new rules set out the criteria that Brussels will apply when assessing State aid in the context of the fight against climate change, environmental protection and energy, and will define when it can be considered compatible with the functioning of the single market.

The new regulation allows aid of up to 100% of the financing gap in the field of technologies that contribute to reducing and preventing emissions in different sectors, from renewable energies to industrial decarbonization. The scope for aid is also extended to areas such as the protection of biodiversity, the circular economy, waste management, or clean mobility. These guidelines also introduce further reductions in electricity levies for large energy consumers to prevent them from moving their activities to other countries with lower environmental standards, in exchange for commitments to reduce their carbon footprint.

The aim is also to reduce obstacles. In fact, the Commission will remove the individual notification requirement for large green projects that fall under pre-approved aid schemes. It also seeks to ensure consistency with the objectives of the pact, for example by discouraging investment in fossil fuels or in activities that may have a harmful impact on the environment, as well as introducing new safeguards to ensure that aid is effectively allocated where it is needed. “Our goal is, and will continue to be, to phase out dependence on fossil fuels, including gas,” Vestager said.

Although this means that Brussels recognises the possibility of directing public funding to gas, the announcement comes before the Commission’s decision on the taxonomy, which defines what can be considered as green investment, is delayed. Brussels had to determine precisely whether natural gas or nuclear energy could be included in this framework before the end of the year. With EU countries divided on the issue, the EU executive will continue consultations and will not reveal its position until early 2022.

Source: The Economist