April 24, 2020 / 2:56 PM / in a month

EU accused of risking climate goals with 'no strings attached' state handouts

(Reuters) - The European Union is facing pressure from environmentalists and lawmakers to attach conditions to state aid packages to protect climate goals, as countries pump cash into ailing firms and polluting sectors during the coronavirus pandemic.

FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels, Belgium, April 10, 2019. REUTERS/Yves Herman/File Photo

The EU agreed on Thursday to build a trillion-euro recovery fund to revive economies ravaged by the pandemic and has so far signed off on state aid worth 1.8 trillion euros ($1.94 trillion).

So far, the Commission, the bloc’s executive, has not attached ‘green strings’ to its approvals of aid from national budgets, as the health crisis takes priority.

Green advocates say they want guarantees that any upcoming state aid will uphold the bloc’s climate ambitions.

“We cannot afford to make the same mistake we did after the financial crisis of 2009 and use public money to invest in the economy, without taking into consideration Green Deal objectives,” Pascal Canfin, a French EU lawmaker who chairs European parliament’s environment committee, told Reuters.

Canfin said EU approvals must be tied to a pledge from companies that within six months of receiving state aid, they will produce a plan to shift their business towards alignment with the global Paris Agreement on combating climate change.

The bloc’s chief executive, Ursula von der Leyen, said on Thursday the new trillion euro package being drafted for review around mid-May, would boost her Green Deal plan to cut EU net emissions to zero by 2050, without giving further details.

In a letter sent to the Commission on Thursday, seen by Reuters, green groups including WWF, Greenpeace and Transport & Environment called for “strict sustainability conditions” on state aid approvals.

High-carbon industries should only get support if they set climate targets, pledge to spend more on low-carbon assets, or shut down polluting ones, they said.

“We are dismayed that the Commission so far appears to be unwilling to fully utilise the single most powerful instrument it has at its disposal to steer the direction of the recovery: its state aid vetting powers,” the letter said.

Asked on Friday why it hadn’t attached green strings to state aid approvals, the Commission said its 27 member states already have the option to add extra criteria to their support packages.

“It is up to member states to decide if they wish to grant State aid and to design measures in line with EU State aid rules and their policy objectives, such as enabling the green and digital transformation of their economies,” a Commission spokeswoman said.

GREEN STRINGS

So far, few have.

Last week, Austrian environment minister Leonore Gewessler said state aid for Austrian Airlines should be conditional on climate measures. State aid already signed off by the EU for Danish and Swedish airlines does not attach green strings.

“It is absolutely clear that if you leave it to this ‘one by one’ situation, the Green Deal project will lose,” Matthias Buck, head of European energy policy at think tank Agora Energiewende, told Reuters.

“The question is whether the Commission has the political guts to just be very clear and tell member states that it will be rigorously using state aid to push for the Green Deal.”

According to Buck, the state aid framework should block subsidies for activities that would thwart climate goals – for example, installing gas heating systems which could still be running in 30 years’ time, when EU emissions should have reached net zero.

Meanwhile, approvals should be made quicker and easier for “green activities” like energy-efficient building renovations.

The Commission plans to review environment and energy state aid rules in 2021 to align them with its Green Deal. Campaigners fear this will be too late.

Once Europe’s post-crisis recovery measures are paid for, countries may have little firepower left to deliver the huge investments the Commission had foreseen for its Green Deal - up to 1 trillion euros over the next decade.

“You can spend public money only once,” Buck said.

Reporting by Kate Abnett, additional reporting by Foo Yun Chee and Gabriela Baczynska; Editing by Elaine Hardcastle

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