EU competition rules and the Green Deal – The Commission’s Consultation

Climate change is rapidly degrading habitats and shrinking wildlife. In addition, it has the potential to create very significant economic harm. The European Commission (Commission) has recognised this and the "Green Deal" aims to make Europe the first climate-neutral continent by 2050. In September, President Von der Leyen set out the Commission's proposal to increase its 2030 target for emissions reductions from 40% to at least 55%. The Commission will also put new proposals on the table by mid-next year on energy and climate legislation, including to adapt the EU Emissions Trading System, and to tighten energy efficiency rules as well as CO2 standards for cars, trucks and buses.

Are competition policy and a green policy compatible?

Competition drives innovation that develops new technologies and which can contribute to reduced harm to the environment. In addition, competition keeps prices down, so there can be more investment in green technologies (e.g. wind-generated power). Competition also gives industry a powerful incentive to use the planet’s diminishing resources efficiently. In markets that are competitive, companies need to keep down the costs of doing business and that includes using less resources (such as raw materials and energy).

The Consultation and the Green Deal

While competition policy will not replace environmental laws or green investment, the real issue is how the EU competition rules can support the Green Deal. In that regard, a debate has been started on how EU competition policy can support the Green Deal. The Commission has published a call for contributions by 20 November 2020 (Consultation)¹ on how EU competition rules and sustainability can co-exist. The Consultation is designed to gather ideas and proposals from those with a stake in this issue, including competition experts, academia, industry, environmental groups and consumer organisations. The contributions will feed into a conference on the subject early next year.

What does the Consultation cover?

EU rules on State aid

EU State aid rules generally prohibit State aid unless it is justified by reasons of general economic development. To achieve the Green Deal (and other environmental goals) investment is needed and State aid plays a key part in this. The application of the State aid rules by the Commission may generally be regarded as encouraging green investment by Member States (though with conditions to ensure that the investment is made in the most effective way). For example, the Commission found last September that an integrated project jointly notified by France, Germany, Italy and the UK for research and innovation in microelectronics was in line with the EU State aid rules and contributed to a common EU interest in developing innovative, greener batteries. The assessment of the compatibility of an aid measure has been about balancing its negative effects on trade and competition in the internal market with its positive effects in terms of contributing to the achievement of an objective of common interest.

The questions raised by the Consultation on State aid include: (i) should there be changes in the current State aid rulebook to ensure it fully supports the Green Deal, and (ii) how could State aid be structured to support environmental objectives?

EU competition rules on anti-competitive agreements and abuse of dominance

EU competition rules prohibit anticompetitive practices by companies, such as anticompetitive agreements (i.e. Article 101 of the Treaty on the Functioning of the European Union (TFEU)) or abuses of a dominant position (i.e. Article 102 TFEU). EU antitrust rules are applied in parallel by the Commission, national competition authorities (including the Competition and Consumer Protection Commission (CCPC) in Ireland) and national courts (including the Irish Courts). EU antitrust rules contribute to the Green Deal objectives, for example, by:

(i) prohibiting behaviour such as restrictions in the development or roll-out of clean technologies or foreclosing access to essential infrastructure, such as power transmission lines (important for the roll-out of wind farms and other renewable energy sources), and

(ii) facilitating energy flowing freely across EU borders based on competition between energy operators and a more efficient use of natural resources. Open, transparent and non-discriminatory standards agreements between businesses with no exchange of competitively sensitive information can also contribute to the Green Deal.

Agreements pursuing sustainability objectives may benefit from the Commission’s block exemption regulations (BERs) if they do not contain hard-core restrictions and if the joint market shares of the parties to the agreement do not exceed certain thresholds.

The questions raised by the Consultation on the EU antitrust rules include: (i) when could cooperation between businesses instead of competition better support the Green Deal, and (ii) does the Commission need to provide further guidance on the characteristics of agreements that serve the Green Deal without restricting competition?

EU merger control

Under the EU merger control rules, the Commission assesses whether mergers and acquisitions of a certain size significantly impede effective competition in the internal market. Some mergers can lead to a reduction in pressure between businesses to innovate on sustainability aspects of some products or production processes.

The questions raised by the Consultation include how can the EU merger control rules better ensure that there is no loss of environmental innovation caused by mergers between rivals?

Concluding comments

A key aspect of the outcome of the Consultation will be whether the EU considers it needs to legislate to change the current EU competition rules to accommodate change or whether the current tools are sufficient so that only guidance or changes to the BERs will be sufficient (e.g. in the context of collaboration between competitors). The impact of the Consultation on the application of the EU competition rules will have an effect on the application of Irish competition law (and in particular on the application by the CCPC and the Irish Courts of the Irish rules on anti-competitive agreements, abuse of dominance and merger control under the Competition Act 2002 (as amended)). The Green Deal initiative comes at a busy time for the Commission with its proposed Digital Services Act, New Competition Tool and efforts to address the effects of foreign subsidies.

For more information on this topic please contact Alan McCarthy, Partner or any member of the EU, Competition & Procurement team.

Date published: 2 November 2020

¹Commission call for contributions: “Competition Policy Supporting the Green Deal – Call for Contributions”. Contributions should be sent to: COMP-GREEN-DEAL@ec.europa.eu