EVP Vestager keynote speech at the Global Competition Law Conference: Competition policy for greater resilience and effective transition
“Check against delivery”
I am delighted to be here, for one thing because it means spring has come again. Spring always brings a sense of optimism. And a healthy dose of optimism is what we need as we draw the lessons of this winter.
Mild temperatures this winter were both a blessing, and a curse. They were a blessing because they helped reduce our demand for energy, and ultimately saved us from shortages. To their credit, Industry and citizens also played their role, by moderating consumption. But mild temperatures were also a curse because they bore testimony to climate change.
Our energy policy reflects those concerns. It focuses on our security of supply and the green transition. Today’s discussion is about the role of competition policy in support of those goals. And I have said it before, competition enforcement has its part to play.
To explain how we play this part, I will first talk about how competitive markets are a part of energy policy. Then I will talk about how competition law enforcement supports supply chain security and the green transition.
Competition fosters resilience
First, if recent events have taught us anything, it is the importance of building resilience. Secure energy supplies protect our industries and citizens in times of turmoil. And, fundamentally, competition policy is an instrument of resilience. Companies that have to compete are leaner and better able to cope when a storm strikes. But recent events show that more can be done to protect consumers in the Single Market.
Since the summer of 2021, energy prices have surged. This has hurt European households and businesses, especially following Russia’s invasion of Ukraine. But we avoided a crisis in part thanks to our well-functioning and competitive single electricity market. We were able to rely on the Single Market to provide much needed cross-border electricity. Still, high energy prices and our reliance on Russian gas have shown that there is room for improvement. That is why the Commission has proposed targeted reforms to the EU’s electricity market design. The goal is to rely on the single energy market to deliver lower and more stable prices, security of supply and a more decarbonized production.
Competition policy has an important role to play in this redesign. Competitive energy markets add stability and strength to our grid. The proposal also aims to ensure that markets remain competitive. This includes measures to enhance regulators’ ability to monitor markets.
Other, very concrete efforts were put in place to support our resilience. The EU Energy Platform was initiated last year to diversify energy supply away from Russian gas. By supporting and organising joint purchases of gas we can extend Europe’s reach in this critical market. At the same time, our role is to make sure that private cooperation through this platform fully respects competition rules. We do this by offering guidance to companies interested in participating in the platform. For example, we are actively assisting in defining the scope of information exchanges in the scope of the platform under applicable antitrust standards. Ultimately, the purpose is to set a framework for joint purchasing to reap benefits that will be passed on to final consumers. The platform is due to go live next week.
Support to broader policy initiatives is only one aspect of our action. State aid and antitrust enforcement are also focused on supporting resilient and greener markets.
State aid for resilience and transition
Throughout the crisis period, the competition instrument that has attracted the most attention has been State aid control. This is understandable, and mirrors the reaction during Covid. After all, the nature of the crisis has warranted unprecedented financial support from EU governments.
But the volume of aid granted mustn’t make us forget that this aid is assessed and approved, and that State aid control has been crucial in maintaining and fostering resilience. Put differently, while we often warn against ‘not seeing the forest from the trees’, here we must look at the trees, not the whole forest. State aid serves to allow the right kinds of support: support that delivers public services, that enables innovation, that buffers industry against external shocks. This way we encourage innovative sectors and protect healthy businesses from a chaotic realignment. And by blocking the wrong kinds of support – support that crowds out private investment or unfairly favours certain companies over others – we encourage the kind of fair competition that builds resilience.
And there is space in between these two extremes, in particular in times of crisis. Under Covid, this space has proven vital to sectors like tourism and aviation, which are now well positioned for recovery in many Member States.
This remains just as true for the current Temporary Crisis and Transition Framework. The weaponisation of energy supply by Russia remains an exceptional situation, and that warrants targeted support, with a focus on the most affected industries.
But a crisis response can still be forward-looking. We mustn’t go back to where the EU was in 2019. That level of dependence on fossil fuel energy is neither good for Europe’s resilience, nor is it good for the planet. That is why the Temporary Crisis and Transition Framework has such an explicit focus on ‘transition’, by supporting renewables and energy efficiency: accelerating decarbonisation is key to phasing out the Framework and creating a ‘new normal’ for energy supply – really putting the EU on the path to net zero and strategic energy autonomy.
The greening of our energy and societies is of course also a priority in State aid control. Our 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’) and Communication on Important Projects of Common European Interest (‘IPCEI’) testify to that.
Under the climate guidelines, we recently approved a two billion euro measure by France to support the development of a floating offshore wind farm along the coast of Brittany. First, this checks out in terms of our competition concerns, notably because suppliers will compete in a transparent and non-discriminatory bidding process, and aid will be granted through a two-way Contract for Difference. It is also fully in line with the EU’s Offshore Renewable Energy Strategy to deliver 300 gigawatts of offshore wind electricity by 2050.
Important Projects of Common European Interest play a role with other parts of the puzzle: one of them is hydrogen. No one can say for sure what exact role this technology will play in the future energy mix, but it will definitely have a place. And to get us there, no one company, no one Member State, can take this risk alone. That is where the two project: Hy2Tech and Hy2Use come in. With over 10 billion euros in potential funding, unlocking an additional 15.8 billion in private funds, these Projects achieve the scale needed to make this leap.
Significantly, the Projects spread the benefits across 16 Member States, and across 64 companies, many of which have activities in multiple EU countries. And the results of these Projects will be widely shared, creating positive spillovers across the EU and minimising the risk of unlevelling the playing field.
I underline these facts because such competition safeguards ensure that the right kind of aid does not become the wrong kind of aid.
This is certainly true in times of crisis and it is why, for instance, the aid to Uniper and SEFE was subject to various measures. Both Uniper and SEFE are large gas providers in Germany. Both companies faced serious difficulties after the disruption of gas deliveries from Russia: their recapitalisation by the German State was approved subject to asset divestitures and, for Uniper, the release of bookings for gas storage and pipeline capacity.
The need for competition safeguards matters not just to the particular cases that we reviewed, but also in the broader context. Because every euro that is misallocated is a euro that cannot be spent somewhere else. To ensure a resilient transition, we must remember that taxpayers’ money is also a strategic resource.
Antitrust for resilience and transition
For antitrust rules, we are really in the middle of a review of our rules and Guidelines. And the green transition is a key objective of the rules that we are putting in place.
Antitrust rules should support the green transition. But when an entire industry aims to become more sustainable, the very mechanism by which competition keeps prices low can make the transition more difficult. If a company must incur higher costs in order to achieve a better sustainability outcome, it can face a ‘first mover’ disadvantage – the more competitive the market, the greater this disadvantage can be. That means there are times when cooperation can be a good thing. This is when a market failure is not fully addressed by regulation, so there is space for private actions to complement. We want to enable these actions, but we want to draw a clear line around what constitutes greenwashing: the last thing Europe needs is cartels using sustainability as a cover for illegal collusion.
To provide this clarity, last year we published for consultation our new draft Horizontal Guidelines. The work is now in its final stages. These Guidelines will include a new Chapter on sustainability agreements. We want to provide companies with a clear framework to assess their initiatives and we stand ready to engage with those companies that want to discuss and obtain guidance.
This is just one example of the role antitrust has to play in the transition. Our enforcement work is also a tool in this respect. After all, the only way we can achieve our goals without hurting economic growth is through well-functioning, competitive markets.
We also need to remain vigilant in the face of ongoing crisis conditions.
Perhaps the most important role for antitrust in the green transition is in remaining vigilant as markets evolve. If we are to meet our targets, we need to make sure that more sustainable uses of energy develop unhindered.
Today, we are publishing an extensive study into the market for electric vehicle charging. It’s still an emerging market, but soon these networks will become vital pieces of infrastructure. The study provides an overview of market developments in all EU countries, with a deep dive into four of them. It looks at how infrastructure is being funded, and the stakes for competition enforcement and the protection of incentives to invest. It will help us identify potential competition concerns early on. We will also continue the discussion with our colleagues within the European Competition Network on how best we can cooperate on this.
After spring comes summer. If last year was anything to go by, it will be another stark reminder of what all of this policy work is really about. 2022 was Europe’s hottest summer in all of recorded history. Do you know what the second hottest summer was? 2021.
With floods, droughts and wildfires like we’ve never seen before, it should be clear how urgent climate action has become. We have to do everything we can to make that transition as effective and durable as possible – and for that healthy competition has an important role to play.