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Neelie Kroes

European Commissioner for Competition Policy

State Aid and climate change – creating the right incentives for business

Address at Round Table on Environmental Protection and Climate Change
Brussels, 27th May 2008

Ladies and Gentlemen,

It is my pleasure to open the round table today on Environmental Protection and Climate Change. In light of the new environmental aid guidelines which the Commission has adopted this January, it is an occasion to discuss about the costs and opportunities of climate change.

The purpose of the round table is to discuss openly on how competition policy can make a difference and contribute positively to broader areas of concern. It is my intention to host similar events before the end of my mandate, for instance on competition's impact on growth or on benefits for consumers.

You have been invited because of your expertise and because you bring to the debate a specific angle, be it from business, academia or policy-making.

When mentioning the economic aspect of climate change, it's easy to focus on the 'doom and gloom' ... on the one hand I hear many worried voices – some are even going as far as saying that our 2020 targets will do nothing for the environment if they just mean jobs and pollution move to China

Yet on the other hand it seems that every time I open a newspaper, or turn on my TV I hear about an innovation or a new market developing on the back of climate change.

Likewise, my impression is that all major companies nowadays stress their efforts in combating climate change, knowing that a green image is important to their reputations and, in turn, their bottom line. I think our panellists will confirm that this morning.

In The Economist two weeks ago I read about the massive market for energy saving measures – and the average 17% returns that are forecast if business and government get behind these ideas. The Australian Environment minister claims that "clean technology is the next industrial revolution."

When even shampoo-makers (I'm thinking of Paul Mitchell) spend their money advertising that they plant trees to off-set their CO2 emissions – that tells us something is changing.

It says to me: 'climate change is about more than the environment'. It has become a catalyst for quite fundamentally changing the way we do business – as we will hear also from Caio Koch-Weser in a moment. Whether that observation holds over the long term is up to you, of course.

But what is obvious is that we can't just debate whether climate change is a threat or an opportunity – it is obviously both.

And it's not a question of when in the future we have to do something about it: we obviously have to change our plans and activities now.

So the questions really become: how do I exploit the opportunities of climate change? How do I minimise any costs it might impose on me?

This is where the Commission's interest and your interest meet.

Often you won't need state aid – the changes will pay for themselves, or new costs will be balanced by new markets.

Our emission trading scheme is the largest multi-country, multi-sector scheme in the world – it's a massive market that business has asked for and which policy leadership has made possible. A great example of how working together achieves results, in my view. And one that is improving over time.

But there are times when you will need state aid, and I'm glad to say it's there for you if it's well-targeted.

New environmental aid guidelines

Our new state aid guidelines have been applicable since the beginning of April.

They set out how Member States may grant environmental aid to ease the burden of the shift to a low-carbon economy

The principle behind them is this: we need to adapt but we can't wreck competition in the process.

If the aid is well-targeted the guidelines are actually very generous. Compared to the previous guidelines they generally allow for higher amounts of aid. Also, they cover several new measures – like aid for acquisition of clean transport vehicles.

I would also like to mention that for energy from renewable sources it is possible to cover all the extra production costs by supporting the difference between the production costs and the market price of the energy.

For costs related to energy saving, small enterprises may forward up to 80% of the bill to their government. Medium-sized and large enterprises can get 70% and 60% aid respectively. If an enterprise has obtained the aid through a competitive bidding process they may even claim 100%.

Let me underline that in the guidelines, I have allowed SMEs to obtain more aid than large enterprises. This is because in many cases the costs of investments in environmental protection represent a higher share of their turnover than it is the case for large companies. In addition, SMEs generally face market failures to a larger extent, in particular, when it comes to obtaining loans or other forms of finance.

So today I hope we can dig into these new guidelines and think about how they can make a lasting impact on both your bottom line and our environmental footprint.

To set the scene, let me remind you that our State Aid Scoreboard which was published last week shows that environmental aid in the European Union has doubled to €14 billion since 2001.

However, there are large disparities between Member States. In terms of GDP, Sweden grants 12 times more aid than the UK, or 77 times more aid than France.

We know that it's the market that is going to provide most of the solutions on these issues – and where this is not the case creating the right incentives are essential – but we also know leadership is necessary to get those incentives functioning.

In terms of leadership style I hope it is obvious that we are determined to take the high road. This will be a race to the top – for the sake of all of us, not to mention our grandchildren; it just cannot end up as a race to the bottom.

So ... what are you doing or what are you going to do to seize the opportunities? Which opportunities can be seized without public support and which opportunities will need public support to become reality in the future?

What new markets will such support help to unlock? Where is state aid necessary to ease the burden of becoming a low-carbon society? Let's use today's Round Table to answer these questions and more.

I think you will all agree that we have an impressive list of speakers and discussants today. Key policy-makers working to change policy to combat climate change; CEOs from some of the most successful companies in using or producing efficient and environmentally effective technologies; top-level representatives of industry associations and other stakeholders.

I hope you feel free to be open with your ideas, and I hope we can keep a positive tone to our debates.

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