Remarks by Executive Vice-President Vestager on the new Guidelines on State aid for Climate, Environmental protection and Energy
21 Dec 2021 02:47 PM
Remarks given yesterday by Executive Vice-President Vestager on the new Guidelines on State aid for Climate, Environmental protection and Energy.
"Check against delivery"
Today, the Commission has endorsed the new Climate, environmental protection and energy State aid Guidelines also known as 'CEEAG'. These Guidelines are a major step to ensuring that our State aid rules play their full role in supporting the European Green Deal.
Tackling climate change, pollution and loss of biodiversity: that is more than just a political priority. It is our promise to future generations.
They are also a chance for Europe to show global leadership. By paving the way to a better kind of economy – more sustainable, more inclusive, more prosperous with new opportunities for business.
With these priorities in mind, the Commission launched the European Green Deal two years ago, under the leadership of my colleague Frans Timmermans. And despite all we have faced since then, our commitment to delivering on the Green Deal only grows stronger.
This summer, we launched our ambitious 'Fit for 55' policy package. Last week, we put more flesh on the bones, by adopting the energy and climate package. And under the European Recovery Plan, billions in funding have been greenlighted to support the Green Deal. We also designed a Just Transition Mechanism, so that we leave no one behind as we continue down the road to climate neutrality.
Back in February, we organised a conference about how competition policy can best contribute to the Green Deal. Competition rules are not in the lead when it comes to fighting climate change, but there was a broad consensus that they play a very important supporting role.
By ensuring efficient and competitive market outcomes, they make green policies more effective – green investments find markets, green innovations get to market, and consumers are free to make greener choices.
State aid policy sets the right incentives and bridges the gap for more sustainable technologies. What we choose to fund from the public purse really matters – for good or for bad.
Wider scope to tackle greenhouse gas emissions
The new Guidelines endorsed today are about increasing the good and limiting the bad.
They build on the possibilities under the current Guidelines to incentivise renewables in a cost-effective way. And they open new doors.
Member States will be able to support any technology delivering carbon reductions, using flexible tools like ‘contracts for difference'. These contracts fix a “strike price”. For example, if you are an energy provider, and the market price is below that strike price, the state pays the difference. If the market price is above the strike price, you may have to pay the difference to the state. This ensures stable and predictable revenue streams.
Maximum aid ceilings are largely done away with. So now State aid can cover the full additional cost of a greener investment, over a less green alternative.
All this will ensure that support can respond to the needs of the industry which stands ready to embrace the Green Deal.
The Guidelines support new actors, like Renewable Energy Communities. We want Member States to empower citizens, by including energy communities in their schemes, and allowing smaller projects to benefit from aid without a tender.
The focus of the new Guidelines is of course still on competition, innovation and value for money.
With competitive bidding as the default mechanism for awarding contracts and setting subsidies, the Guidelines keep competition distortions to a minimum. So that efficient, integrated and competitive markets are free to contribute to the Green Deal.
By requiring public authorities to identify the relative costs of different measures to decrease emissions, the Guidelines shine a light on the most cost-effective approach.
And by requiring public consultations for the largest subsidy schemes, the Guidelines make the process more inclusive and more transparent. They give taxpayers and citizens a say on the support measures they are funding.
Wider scope of the guidelines to cover new areas contributing to the Green Deal
And we're widening the scope to include all areas and technologies that contribute to our ambitious climate and environmental objectives.
In that vein, the new Guidelines extend to State aid for pollution reduction, circular economy and biodiversity. This way, we help limiting many other forms of pollution and waste that continue to harm our climate, to pose a threat to our health and endanger wildlife.
Clean mobility and energy efficiency
The guidelines also include new dedicated sections for clean mobility and energy efficiency in buildings. Those two sectors jointly account for more than half of the EU's total greenhouse gas emissions.
By enabling support for clean vehicles, including vessels and aircrafts, and the infrastructure to recharge and refuel them, we give a boost to the decarbonisation across the whole transport value chain.
By facilitating aid for measures to improve energy efficiency in buildings, our guidelines incentivise investors to make the best out of the Renovation Wave. Because the best energy is still the one you don't use.
So much for the ‘good'. When it comes to the bad, the Guidelines are also closing doors. And that means phasing out support to fossil fuels.
State aid always requires a balance between the benefits of the activity that you are funding, and the distortion the State aid can cause.
The new Guidelines apply that principle when accounting for environmental harm, for example from fossil fuels. Whenever a project is not compatible with our 2030 and 2050 climate targets, the balance is not likely to tip in favour of supporting it with aid.
We also have to be pragmatic – natural gas is a special case, because for now it acts as a bridge on our path to more renewables.
But a bridge is not a destination, and State aid decisions will reflect that logic. Our goal is and will remain, phasing out reliance on fossil fuels – that includes gas. Doing so will not only get us to our destination. Less reliance on imported fossil fuels will also help us avoid the kinds of energy price peaks that we are currently facing.
The green transition is a challenge for EU industry, because it is being called on to make big changes, while still remaining competitive in global markets.
For energy-intensive users, decarbonising and electrifying the production process can be an additional challenge, if they also have to pay the full price of electricity levies. The Guidelines therefore allow a reduction in levies put in place by the Member States to finance green investments.
This has to be done with great care. If reductions are too widespread, they could weaken the incentives to work towards the targets. Or they may shift the burden of the transition to citizens and small businesses. Moreover, the risk of unlevelling the playing field is high – for example, when different companies in the same sector get different treatment.
The new Guidelines are designed with these risks in mind, limiting the number of eligible sectors, as well as making sure the relief is linked to commitments to reduce the carbon footprint.
Today's Guidelines are the result of an extensive consultation process. I want to thank all the stakeholders for their contributions. It really shows the commitment we all share to making our Green Deal happen.
Once they are formally adopted early next year, the Guidelines will apply to all decisions that the Commission takes.
We recognise that existing schemes need time to adapt to these new rules. So Member States have two years to do so.
Today's Guidelines are one aspect of what EU Competition policy is doing to support the Green Deal.
We will also expand the scope of our General Block Exemption Regulation. This way, Member States can mobilise more aid for green projects, without the need for prior approval from the Commission. In 2019, over 95 % of new State aid measures were already exempted from notification and, with the proposed targeted amendments, we expect this share to increase further.
Our focus is on what is practical, and on what can work. Because what matters is not the number of boxes we tick; but delivering on our promise to future generations – and competition policy will continue to play its role in achieving that.
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