EU Braces For COP 28
But also — Enlargement, Chinese Vehicles, Nature Restoration, Apple, Elections
Hi! This is Thursday, 16 November 2023, and here’s the EU news you need this week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and Linkedin.
The Briefing
On November 30, COP 28 will kick off in Dubai. In recent weeks, intra-European discussions about the position to adopt at this summit have intensified, revealing tensions on key climate-related issues.
EU & COP • While each Member State will be represented through its own delegation at COP 28, a dedicated EU delegation will also be present at the summit.
Similar to the Member States, the EU is itself a signatory to the UN Framework Convention on Climate Change (UNFCCC) which provides that signatory parties convene annually for COPs ("Conferences of the Parties"). Of the 198 parties involved, all except the EU are states.
The EU will be represented jointly by the Commission and the EU Council under the Spanish presidency.
FOSSIL FUELS • In recent months, Member States have been working on formulating a common negotiating mandate for the EU at COP. Discussions have revealed significant differences between Member States, particularly regarding a potential fossil fuel phase-out.
At COP 28, much attention will be focused on a potential international agreement concerning the gradual phase-out of fossil fuels. While parties agreed in 2015 to reduce CO2 emissions to limit global warming to 1.5°C, there has so far never been an agreement on ending the use of fossil fuels. The term "fossil fuel" is not even mentioned in the Paris Agreement.
The agreement reached last year at COP 27 only mentions the end of coal and inefficient subsidies to fossil fuels. During that COP, India made a last-minute proposal for an agreement on ending the use of fossil fuels. This proposal only garnered support from 80 parties (including the EU and the United States).
Debates on this topic are expected to resume at COP 28.
ONE WORD • Within the Council, discussions on the negotiating mandate focused on a mysterious adjective: “unabated”. This adjective characterizes fossil fuels whose combustion is not accompanied by carbon capture and storage (CCS) technologies (by opposition to “abated” fossil fuels). This combustion releases CO2 emissions into the atmosphere, contributing to climate change.
If accompanied by CCS, these fossil fuels would theoretically be emission-free, as carbon emitted during combustion would be captured and stored.
Member States had to decide whether the EU should call for a gradual phase-out of fossil fuels without CCS only or for a gradual phase-out of all fossil fuels.
On one side, the Czech Republic, Hungary, Italy, Malta, Slovakia, and Poland wanted the EU to only call for the end of fossil fuels without CCS.
On the other side, around ten member states, including France, Germany, Denmark, Ireland, the Netherlands, and Slovakia, insisted that the negotiating mandate should mention the end of all fossil fuels. CCS methods are indeed criticized for being difficult to implement on a large scale — among other reasons, geological storage locations for capture CO2 are rare and often located far from combustion sites.
VERDICT • Since the negotiating mandate requires a unanimity vote, it is the first option that was chosen, i.e. the phase-out of fossil fuels not accompanied by CCS only.
Nonetheless, it is highly uncertain that the EU and other parties with similar positions will convince all 198 parties to sign an agreement on a fossil fuel phase-out, even if it is limited to fossil fuels without CCS.
During a G20 meeting in July, Saudi Arabia, Russia, and China blocked a similar agreement. In April, the G7 however reached an agreement on this issue.
Despite its negotiating strength, caution is warranted regarding the EU's chances of securing such an agreement with its allies.
THE REST • The negotiating mandate adopted by the Council also calls for:
Tripling the capacity of renewable energy production by 2030.
Doubling the rate of improvement in energy efficiency by 2030.
Additionally, the Commission announced its readiness to “announce a substantial financial contribution from the EU and its member states to the Loss and Damage Fund at COP 28”. This fund aims to compensate vulnerable states already affected by the effects of climate change. COP 28 will be an opportunity to finalize the details of this fund adopted at COP 27.
Inter Alia
ENLARGEMENT • On November 8, the European Commission adopted its 2023 enlargement package. Enlargement packages are annual reports in which the Commission analyzes the progress made by EU membership candidates or countries awaiting to be designated as such.
In its 2023 edition, the Commission recommends opening accession negotiations with Ukraine and Moldova on the condition that certain measures are implemented in both countries. Once these measures are in place, the Commission will recommend to the Council to adopt — unanimously — a mandate for negotiations.
In this report, the Commission also recommends starting negotiations with Bosnia-Herzegovina once a better degree of alignment with accession criteria is reached, implying a longer delay before negotiations can start. The Commission also recommends granting candidate status to Georgia.
The topic of enlargement will be on the agenda for the next European Council meeting in December.
CHINESE VEHICLES • On October 4, the Commission initiated an investigation into subsidies for the export of Chinese electric vehicles. Chinese electric vehicles are steadily gaining market share in Europe — 8% in 2023 — causing concern in the automotive industry.
On November 11, the Commission officially released the list of companies that will be subject to this investigation, according to Politico sources (to our knowledge, the documents are not public). Surprisingly, Tesla, the main exporter of electric vehicles from China to Europe, is not targeted by the anti-subsidy investigation.
Tesla reacted negatively to this piece of news. Paradoxically, the company considers that its absence from the investigation could undermine its right to defence, especially if tariffs are imposed on Chinese electric vehicle exports to the European market after the investigation. Tesla would be disadvantaged if tariffs are calculated based on subsidies granted to (Chinese) manufacturers but applied to all exports from China to Europe (including Tesla).
ENVI • On Thursday, November 9, the Council and Parliament reached a compromise on the nature restoration regulation. This regulation aims to restore 30% of degraded land and sea areas by 2030 and 90% by 2050.
However, this agreement is a Pyrrhic victory, given the important concessions that were made to secure it. The far-right and the European People's Party (EPP) had vehemently opposed the regulation for months, arguing that it would harm farmers and jeopardize EU food security.
The legislation now includes means obligations — and not results obligations — with numerous flexibilities, a focus on Natura 2000 exclusively for prioritized nature restauration until 2030, and an “emergency brake” that can be activated by the Commission for one year at the request of states in case of a food crisis.
APPLE • In an opinion published on November 9, Advocate General Giovanni Pitruzzella asks the Court of Justice of the EU (CJEU) to confirm the Commission's initial decision in the tax rulings case between Ireland and Apple. According to the Commission, Apple's effective tax rate in Europe would be less than 1% of its profits.
As early as 2016, the Commission concluded that the Irish tax regime was incompatible with EU rules on state aid, requiring Ireland to recover €14 billion in unpaid taxes Apple appealed the decision and, in 2020, the EU General Court annulled the Commission's decision. European judges considered that the Commission had not sufficiently demonstrated that the tax agreement gave Apple an “economic advantage”.
In his opinion, Advocate General Pitruzzella argues that the General Court's decision is flawed in terms of law and methodology, to such an extent that he asks the CJEU to annul the judgment and refer it back to the General Court for reconsideration. If the Advocate General's opinion is followed, Ireland would have no choice but to recover these €14 billion.
Tax rulings between EU member states and multinational companies have been under Brussels' scrutiny for years. These investigations involve the Netherlands, Luxembourg, and Ireland, and companies like Engie, Apple, Fiat, Amazon, and Starbucks.
Due to the lack of harmonization in corporate tax matters — these decisions are made unanimously in the EU Council — Brussels has resorted to competition law to challenge these tax rulings. So far, Brussels has had mixed success before European courts.
ELECTIONS • The Spanish Socialist Party, led by interim Prime Minister Pedro Sánchez, has reached a controversial agreement granting amnesty to Catalan separatists. The agreement involves pardoning activists who played a role in the failed 2017 attempt by Catalonia to achieve independence through an illegal referendum. The reason? Pedro Sánchez needs the support of Junts (Together), the separatist party led by Carles Puigdemont, to be able to form a government.
The EU's response to this agreement was swift. Didier Reynders (European Commissioner for Justice) sent a letter to the Spanish justice ministers and the presidency expressing "serious concerns" about the proposed amnesty.
In Poland, Donald Tusk's Civic Platform, the Third Way party, and The Left have signed an agreement laying the groundwork for the next government.
Their accession to power is temporarily on hold, as Polish President Andrzej Duda, who is loyal to PiS, granted outgoing Prime Minister Mateusz Morawiecki the first attempt to form a new government, although his chances of success are slim.
What We’ve Been Reading
Heather Grabbe argues for Bruegel that EU membership should be conditional on the strictest respect for the rule of law.
On the LSE EUROPP blog, Robert Falkner suggests that Europe's dependence on Russian oil and gas will soon be a thing of the past.
ECIPE published a policy brief by Matthias Bauer, Oscar du Roy, and Vanika Sharma on the EU's trade strategy.
This edition was prepared by Guillaume Renée, Kimia Vaye, Marwan Ben Moussa, Clément Albaret, Maxence de La Rochère, and Augustin Bourleaud. See you next week!