Greening competition rules

The European Union (EU) has set sail with its Green Deal to reach climate neutrality by 2050. As all hands are called on deck, is it time for competition enforcers to play a more important role? If so, how could competition policy best support the Green Deal? Such are the questions the European Commission wishes to answer in its call for contributions published on 13 October. Feedback is welcome until 20 November from everyone with a stake in this issue – including industry, environmental groups and consumer organisations. That leaves only 5 weeks to contribute to a timely debate as Commission President Ursula von der Leyen proposes to increase the EU’s 2030 target for emissions reductions from 40% to at least 55% and significant state aid measures are expected to be rolled out with the Green Deal.

Nudging greener choices

The call for contributions follows the announcement by Executive Vice-President Margrethe Vestager during an event on 22 September 2020 of her intention to launch a European debate on how EU competition policy can best support the Green Deal. Competition policy is not going to take the place of environmental laws or green investment. Rather, by “greening” its rules, it could complement existing regulations explained Vestager. The aim is to ensure the rules that keep markets open also help governments pursue green policies. It is expected that state aid will be the biggest area of review as the Commission wishes to prod Member States towards greener policies. Vestager said Brussels could give a “green bonus”, allowing governments to use more state aid for projects that make a genuine contribution to the EU’s green goals. “We could also look at how to build on the success of competitive tenders in keeping renewable energy costs down, by seeing if we could extend that approach to other areas,” she added in her statement. Requiring that state aid must not undermine the Green Deal could also be envisaged. For instance, approval of aid that would harm the environment or would keep polluting factories could be refused. The debate has become crucial as vast investments are expected with the Green Deal.

A topical debate for state aid

With Member States trying to salvage industries during the COVID-19 pandemic, tensions resurfaced. Criticism erupted as the airline industry was provided with more than EUR 33 billion in bailout funds with little to no climate conditions. Only the French and Austrian governments tied their aid to the condition that the airlines reduce emissions from domestic flights and commit to using at least 2% alternative fuels. In an analysis published on 1 October, NGO ClientEarth notes that  the Commission is already required to ensure national aid measures are consistent with national and EU climate objectives since the Green Deal and other climate-orientated legislation legally bind the EU and its institutions to carbon-reduction objectives. As such, state aid should be green or illegal. To help Member States avoid falling foul of the rules, the report recommends further clarity in implementing a “compatibility assessment criterion”. Further guidance has also been called by businesses in other aspects of competition law to soften existing tensions with environmental or energy rules.

An opportunity for further clarification

Under current EU antitrust rules, environmental or sustainability considerations are not considered when assessing the impact of a merger or the legality of an agreement between companies. The line between justifiable, sustainable cooperation and anticompetitive collusion is not always clearly defined. Companies can be found in breach of competition law for cooperating even if they seek to further environmental claims. Answering a call from businesses for clarity on this issue, several countries are looking into how best to consider the environmental impact when analysing horizontal agreements. In July, the Dutch competition authority proposed new draft guidelines, which aim to make it easier for companies to agree to produce greener products, without breaking competition rules. In September, the Greek competition authority also published a paper, which looks at how competition policy could contribute more to support the green transition. However, there is no unanimity in the EU on these proposals, with some competition authorities such as Lithuania’s expressing skepticism claiming they could open the door to “greenwashing” cartels. Calls for caution have also been made within the Commission and by competition specialists.

Hence, this is all the more reason to participate in this timely debate. The results of the consultation will be discussed at a conference in early 2021.