Brussels seeks to skew state subsidy rules away from fossil fuels

Good morning and welcome to Europe Express.

The European Commission these days is busy ‘greening’ its policy areas, including competition, in order to provide the right incentives for governments and businesses to embrace the Green Deal.

My colleagues got their hands on tomorrow’s review of the bloc’s state-aid rules, which provides new sticks for heavy polluters and governments subsidising them — and lots of carrots for green and high-tech providers.

Meanwhile, an anti-deforestation law to be published today will force companies to prove that products including beef, coffee and timber sold into the EU’s single market did not contribute to illegal logging, the EU’s environment commissioner told the Financial Times.

On the Franco-British disputes (it’s not just about fish), we can report some temporary detente after French authorities yesterday cleared a camp of migrants waiting for a chance to cross the Channel.

And in Balkan news, we look at why Germany recently has been pushing for sanctions against a Bosnian leader.

Greening state-aid rules

Margrethe Vestager, the EU’s competition chief, is looking to broaden state-aid restrictions for polluting companies as part of a green overhaul of the bloc’s competition rules, write Javier Espinoza and Mehreen Khan in Brussels.

Tomorrow, the European Commission will publish an update to its competition rulebook, a draft of which was seen by Europe Express. One interesting detail is about how competition policy may be used in the future to incentivise companies to embrace the Green Deal.

Brussels is keen for fossil fuels to be phased out and as a result it will be looking at heavily polluting companies unfavourably when it comes to approving state aid.

“State support for projects involving such fuels, in particular the most polluting fossil fuels, ones such as oil, coal and lignite, is unlikely to be found compatible with state-aid rules,” the draft reads.

In addition, the commission says it will specifically consider “negative externalities” (meaning pollution) as a criterion for refusing to grant the approval of state aid to a company.

There are positive incentives, too.

Companies that show a willingness to innovate and present cleaner products to the market will get bonus points when it comes to state aid. According to the draft, it will be easier to hand out state aid “for the acquisition of zero/low carbon emission vehicles and for investments in the related recharging and refuelling infrastructures”.

The prohibition of fossil fuels-related subsidies is for the so-called “low hanging fruit” of oil, coal and lignite — energy sources with the most polluting carbon footprint, which many EU governments are distancing themselves from.

Taxpayer cash for sensitive technologies such as semiconductors, but also for nuclear power could be given the green light by the commission. The document says EU state-aid rules should also pay “particular attention” to the “do no significant harm” principle — a category Brussels has used to assess the green credentials of nuclear power and natural gas.

Supporters of nuclear power such as France and the Czech Republic, as well as an assessment from the commission’s in-house research group, say nuclear power is not responsible for more harm than other energy sources and is vital in the shift to net zero emissions. Gas is not mentioned in the commission’s text.

Brussels’ move to phase out state support for some parts of the fossil fuel industry will be welcome news for environmental campaigners who have been putting pressure on other major EU institutions — such as the European Central Bank — to stop using billions in quantitative easing to buy the bonds of major polluters. Progress on that front has been far slower.

The green tilt for state-aid rules follows the commission’s approval of tens of billions in taxpayer money to Europe’s airline industry during the pandemic. For countries such as France and the Netherlands, that cash came with promises that the carriers had to make significant steps towards reducing carbon emissions.

Chart du jour: Gas half-full

Among the factors shaping the recent gas price crisis are the low underground gas storage levels in Europe, 15 per cent lower in September compared to their five-year average levels, writes the International Energy Agency.

French crackdown

French police moved hundreds of migrants out of what interior minister Gérald Darmanin called an illegal encampment on the Channel coast yesterday. The crackdown came just hours after he held a videoconference with his UK counterpart Priti Patel on the thousands who attempt to cross to England in small boats, writes Victor Mallet in Paris.

The UK and France have had bitter exchanges for years about the numbers of migrants, many from the Middle East and Afghanistan, seeking to reach the UK from France by clandestine means. London has accused France of failing to stem the tide on the French side of the Channel, while Paris blames the UK for its lax approach to migration and to monitoring its labour market.

According to the local prefecture, 663 people were taken from the camp at Grande-Synthe near Dunkirk for humanitarian reasons and moved to shelter, while the security forces questioned 35 people suspected of being people traffickers or other lawbreakers.

On Monday, before the exchange with Patel, Darmanin said the British “should stop using us as the punchbag for their domestic politics”. On CNews television he criticised “the UK labour market which functions in large part thanks to a reserve force, as Karl Marx would say, of illegals who can work for low wage”.

“If the British fundamentally changed their laws — they have done it, but not enough — these people would no longer be in Calais or Dunkirk,” Darmanin said.

The migrants themselves often say they plan to join family members in the UK or want to go there because they speak some English.

Patel said she had discussed with Darmanin “a range of additional steps to tackle the problem and reiterated the importance of working together to make this deadly route unviable”.

According to the French authorities, whose anti-migrant operations in the Channel are financed in part by the UK, the country’s border police have dismantled 26 people trafficking gangs since the start of the year, 16 of them linked directly to maritime crossings, and questioned 1,197 traffickers.

Despite this most recent crackdown, however, the migratory pressure is likely to continue to be an irritant between the UK and France.

Threat of sanctions

Political and ethnic tensions have always been simmering below the surface in Bosnia and Herzegovina, but things have taken a turn for the worse after Bosnian Serb leader Milorad Dodik last month threatened to secede the Serbian-speaking part from the federation, writes Marton Dunai in Budapest.

Now some EU countries — led by neighbouring Croatia, but also Germany and Spain — are asking the EU to prepare sanctions against Dodik.

“We need a tougher stance towards those on the ground who question state structures, who are inciting people to hatred and who want to cut relations with the European Union,” said German foreign minister Heiko Maas after a meeting of EU foreign ministers where they discussed the matter. “We have to consider whether sanctions may be a possibility to stop this development,” he added.

According to diplomats familiar with the discussion, Croatia, Germany, Spain, the Czech Republic all asked for sanctions on Dodik, while the Benelux countries said sanctions should be considered if the situation deteriorated further. Meanwhile, Hungary spoke against the use of sanctions and called for more dialogue with Dodik.

In an attempt to position himself as a mediator, Hungary’s prime minister Viktor Orban made a trip to Banja Luka, the capital of the Serb Republic, for a working lunch with Dodik earlier this month. Orban also keeps close ties with Serbian leader Alexander Vucic and Russia’s Vladimir Putin, both important partners for Dodik.

Long a critic of growing powers of Sarajevo, the capital of the country with three ethnic groups, Dodik ignited a rare international outcry this time.

The United Nations, the United States, and several European partners as well as the European Union have denounced his threats as undermining the region’s stability.

The threat of sanctions has been floated by the US, whose envoy for the Western Balkans went to Banja Luka earlier this month. Germany has in recent days also floated the possibility of cutting funds to Bosnia. No response has come yet Dodik, who has been ruling the Serbian part of the country for more than a decade.

What to watch today

1. Brussels will unveil a sweeping anti-deforestation law

2. Competition chief Margrethe Vestager is having a videocall with Google CEO Sundar Pichai

3. Belgian authorities meet on new Covid-19 restrictions

Notable, Quotable

There is a real concern that . . . if we have a cold winter that we could have rolling blackouts in Europe

• Blackout winter: Europe risks rolling power outages if there is a prolonged period of cold weather this winter, according to the chief executive of Trafigura, one of the world’s biggest commodity traders. Meanwhile, the price of gas jumped yesterday after Germany’s energy regulator “temporarily suspended” the certification of the Kremlin-backed Nord Stream 2 pipeline.

• ‘Hotel California tax’ Political forces in the Netherlands want the Dutch parliament to hastily agree an “exit tax” to hit energy giant Shell on its way out of the country with potentially billions in fines.

• Greek confidence: The Prime Minister of Greece, Kyriakos Mitsotakis, in an interview with the FT expressed confidence that the EU will overhaul its debt and deficit rules in the wake of the coronavirus pandemic, giving governments more leeway to invest.

• UK terror threat: The terror threat level has been raised to “severe”, the second-highest, after a fatal explosion in Liverpool on Sunday was ruled a “terrorist incident”. This was the second such incident in a month, following the killing of a Conservative MP, which police branded an act of terrorism.

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