The European Union’s top climate official encouraged governments on Monday to attach green conditions to public support for coronavirus-hit companies, after the bloc’s executive opted not to do so at the EU level.

The European Commission, which approves state support schemes, updated its temporary rules on Friday for firms receiving government aid during the pandemic.

The new rules ban dividends, share buybacks and bonuses for bailed-out companies, for so long as the state holds a stake in them.

They do not attach climate-related conditions to EU approvals of state aid - despite calls from lawmakers and green groups to do so - and instead leave it to national governments to choose to add “green strings” to bailouts.

“If an airline goes to national authorities and asks for support, I think it is legitimate to ask: ‘What are you going to do for society in return? Are you going to put a cap on bonuses? Are you going to stop paying dividends? Are you going to lower your carbon footprint?’” EU Climate Commissioner Frans Timmermans said in a video call with lawmakers on Monday.

The EU executive has said its “Green Deal” plan to cut net EU greenhouse gas emissions to zero by 2050 will guide the bloc’s economic recovery.

But it has proved unwilling to use state aid rules - which are designed to avoid distortions of competition - to link countries’ support schemes to climate goals. EU competition regulators said the current objective was to help virus-hit companies cope with liquidity and solvency issues.

Under its revised temporary state aid framework, unveiled on Friday, large firms must report on how they use public funds in line with the EU’s green goals. The framework does not require firms to use state funds to become greener, or oblige governments to attach climate conditions to support.

Member states are “free to design national measures in line with additional policy objectives” such as climate aims, it said.

Luxembourg Energy Minister Claude Turmes said on Monday that a lack of European coordination could mean some countries’ efforts to attach green strings to bailouts were undermined by states that did not.

“We are organising a distortion of the internal market of a magnitude never seen,” he said, pointing to airline bailouts as an area where that could occur.

The Commission has already signed off on 1.9 trillion euros in state support schemes for companies during the pandemic.

Among those are a 7 billion euro package of public and state-backed loans from the French government to Air France, which Paris has said will require the airline to cut its carbon emissions.

Guest post from Reuters