EU's Green Taxonomy To Include Nuclear and Gas as 'Transitional Energies'
Also — Green Taxonomy, Standardization, ECB, Poland
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Commission Unveils Green Taxonomy, Amidst Divisions on Nuclear and Gas
The Commission’s publication of the proposed EU taxonomy for sustainable activities last Wednesday did not end the debate on an issue that has divided European capitals, experts, and activists for years.
STILL ARGUING • The inclusion of gas and nuclear in the list of “transitional” technologies remains contentious. European Commissioners themselves failed to reach unanimity — three of them voted against the delegated act, and two were absent. EU Financial Services Commissioner, Mairead McGuinness, explained in a press conference that because renewable sources of energy will not prove sufficient to meet the block’s future needs, gas and nuclear could contribute to Europe’s transition to climate neutrality. She clarified that the inclusion of gas and nuclear in the proposal has been made “subject to clear limits and phase-out periods”.
POLITICKING • The proposed EU taxonomy is a victory for the French-led alliance of Member States that expect nuclear power to remain part of their energy mix for decades to come. This commitment puts them at loggerheads with those, including Germany, Austria, Denmark, Luxembourg and Portugal, who oppose the use of nuclear power.
Luxembourg and Austria have already declared their intention to have the proposal reviewed by the Court of Justice for incompatibility with the Union's climate change targets. However, the outcome may still be viewed as acceptable for the German government, which lobbied for the inclusion of gas against the wishes of Denmark, Sweden, Austria, and the Netherlands.
NGOs • Meanwhile, environmental NGO Greenpeace has labelled the Commission’s proposal an “attempted robbery”, since its effect may be to divert hundreds of billions of euros in private investments away from projects focusing on the development of renewable energy.
“I’d like to report an attempted robbery, please. Someone is trying to take billions of euro away from renewables and sink them into technologies that either do nothing to fight the climate crisis, like nuclear, or which actively make the problem worse, like fossil gas. The suspect is at EU Commission HQ and has disguised herself as someone to be taken seriously on the climate and nature crisis.” — Ariadna Rodrigo, Greenpeace
WHAT NEXT? • The new text will be presented to the European Parliament, which will hold a debate and a vote on its adoption. The outcome is not a fait accompli: an outright refusal of the Commission’s proposal appears possible in the face of opposition led by Green and S&D MEPs.
The proposal will then have to be reviewed by the Council of the EU, where countries like Spain, Portugal, Denmark, Luxembourg, and Austria have already signalled their intention to vote down the inclusion of gas and nuclear power in Europe’s green finance rulebook. A setback is unlikely at the Council — where a reverse qualified majority of 20 Member States out of the EU’s 27 is needed to block the text.
EU Wants to Face China Challenge with New Standardization Strategy
On 2 February, the European Commission presented its strategy on standardisation, which aims to increase regulatory convergence within the internal market — and, more importantly, to assert its regulatory clout worldwide in the face of Chinese expansion.
CHINA’S CHALLENGE • China’s technological lead in 5G has allowed it to take a lead in the international race to set standards for this critical technology. Its "China Standards 2035" project intends to impose its standards in 5G and artificial intelligence. In 2020, the EU requested ETSI to draft standards that would require smartphones sold in Europe to be compatible with the EU's Galileo satellite navigation system. "That request was simply denied," Breton said, adding that the rejection was due to the dominance of foreign companies in ETSI's governance board.
BRUSSELS FIGHTS BACK • The Commission is intent on countering China’s challenge as soon as possible. “Standardization is not just a purely technical process, it must be a real political, even geopolitical priority,” insists Thierry Breton, the block’s internal market supremo.
Brussels is thus proposing to curtail non-EU corporate influence in European Standardization Organizations (ESOs), which decide on European standards. To affirm its standards in strategic areas, such as climate or digital transition, the Commission calls on its Member States to deepen coordination. It also insists on current priorities: vaccines and drugs production, clean hydrogen, chips certification, standards improving interoperability and data sharing.
The Commission also wishes to bolster the EU’s position within international bodies, such as the International Organization for Standardization (ISO), where China is very active and holds most strategic positions — including lithium, Internet protocol or facial recognition. The EU is also keen on strengthening its collaboration with like-minded countries. The recently created Trade and Technology Council will provide a natural hub for such discussions with the US.
BRUSSELS EFFECT • Historically, the issue of standardization is important to the Union’s self-perception as a strong internal market, whose weight allows it to act as a “regulatory super-power” abroad. This has caused other trading partners to adopt European standards, which has been dubbed the Brussels effect by legal scholar and Columbia law professor Anu Bradford. “Technical standards are of strategic importance. Europe's technological sovereignty, ability to reduce dependencies and protection of EU values will rely on our ability to be a global standard-setter”, said Internal Market Commissioner Thierry Breton in a statement.
Record Inflation Sparks Talks of Change of Direction for ECB Policy
LAGARDE SPEAKS • On Thursday 3 February, Christine Lagarde, president of the European Central Bank (ECB), said that inflation risks were "on the rise" and refused to rule out a rate hike for this year.
This is a possible turning point for the eurozone's monetary policy: only last month, Christine Lagarde said that such a move was "highly unlikely". The rate hike now seems necessary to maintain the medium-term inflation target of 2%.
BACKGROUND • In July 2021, the ECB introduced a symmetric 2% inflation strategy - replacing the "below but close to 2%" inflation strategy in place since May 2003. Until now, the ECB held that the rise in prices in the last six months of 2021 was only "transitory" and destined to fade away this year. This rise in prices is no longer limited to energy prices, which have risen by more than 600% in 2021 for natural gas and account for more than half of overall inflation.
AMSTERDAM • Klaas Knot, President of the Dutch central bank, has predicted that rate hikes are to be expected in October 2022 and in the spring of 2023. He also previews the inflation rate in the eurozone to be 4% this year. It was 7.6% for the Netherlands in January - the highest level since at least 1997.
LONDON • On 3 February, the Bank of England (BoE) raised its key interest rate for the second consecutive time in three months - influenced by strong US employment figures. This rapid rebound is also affecting labour markets in Europe. Eurostat announced last Tuesday that the unemployment rate was at 7%, linked to a youth unemployment rate of 14.9%, its lowest level ever. The European Commission said that a record number of industrial and service companies are facing labour shortages. The European authorities further expect the rate of wage growth to catch up with the US and the UK.
PEPP • At her press conference, Christine Lagarde confirmed that "As a result, we will continue to gradually reduce the pace of our asset purchases over the next few quarters, and we will end net purchases under the Pandemic Emergency Purchase Programme (PEPP) at the end of March." (ECB). The reaction in the financial markets was swift. For the first time since February 2018, bond yields on five-year German treasury bonds turned positive again. Christine Lagarde's announcement also triggered massive bond sales as well as a rise in the euro.
US Lobbying on DMA Reveals Rift on Digital Governance
Washington goes on the offensive for fears of discriminatory European digital policies but is met with pushback from European ministers and interest organizations.
This morning, the Financial Times reveals that an advisor to US Commerce Secretary Gina Raimondo has written to MEP Andreas Schwab to voice her concerns on the DMA.
DIGITAL INTERFERENCE • While the Council and European Parliament have started the new year with negotiations on the Digital Markets Act (DMA), the US is stepping up its lobbying efforts to change the scope of this legislation aimed at regulating large digital platforms.
Officials have been pushing a policy paper with eight critical concerns over the proposed DMA and the direction of the negotiations. The paper explains: “We think it is important that regulatory efforts on either side of the Atlantic do not create unintended adverse consequences, such as inadvertent cybersecurity risks or harms to technological innovation.”
The new campaign is unsurprising — US Commerce Secretary Raimondo already expressed her doubts about the DMA in early December. She voiced her “serious concerns that these proposals will disproportionately impact U.S.-based tech firms and their ability to adequately serve EU customers and uphold security and privacy standards”. This prompted Internal Market Commissioner Thierry Breton to accuse Raimondo of “lobbying on behalf of the [technology] sector”.
POLICY PIE IN THE SKY • The policy paper contrasts starkly with the transatlantic lofty promises in the joint EU-US tech agenda, announced in December 2020. In the agenda, the EU committed to opening “a transatlantic dialogue on the responsibility of online platforms and Big Tech”, that should focus on addressing market distortions and strengthening cooperation in antitrust enforcement in digital markets. A designated working group on data governance and technology platforms has been established under the umbrella of the EU-US Trade and Technology Council.
However, the EU has decided to charge ahead with legislation imposing new responsibilities for gatekeeper platforms, contradicting the Capitol Hill view that American companies should be regulated by American lawmakers. Indeed, the Commission’s legislative proposal, and in particular the European Parliament's position, targets principally — if not exclusively — American tech companies, such as Google, Meta, Amazon, Apple and Microsoft.
Meta has recently threatened to leave the EU and stop operating Facebook and Instagram because of the block’s data transfer requirements under the General data protection regulation (GDPR).
ANTI-YANKEE Mc CARTHYISM • The policy brief claims that the US “[has] also been clear that we oppose efforts specifically designed to target only U.S. companies where similarly situated non-U.S. companies would not be covered”. It further stresses that the EU should apply any eventual legislation in a non-discriminatory fashion and should ensure that all appropriate or similar companies should be covered. Here, the US hints that the EU should extend the scope to also capture Chinese digital platforms in its enforcement.
Lawmakers’ and K Street’s fears are not unfounded, as Andreas Schwab, chief negotiator for the DMA in the European Parliament, said in an interview with the Financial Times in May 2021 that the legislation should focus on the first five big — American — companies, “and maybe six with Alibaba.”
EUROPEAN RESPONSE • In an exclusive interview with POLITICO, French Digital Minister Cédric O stressed in December 2021 that the DMA “is not an anti-American act” and hoped that more European companies would grow large enough to be covered by the proposal.
A similar defence comes from the Trans Atlantic Consumer Dialogue, a forum of US and EU consumer organisations. In a letter to President Biden, dated 3 February, the TACD stresses that the DMA would not target US companies, but rather dominant companies that can “define how goods, services, and information reach customers.” It offered another counterargument: the U.S. is itself considering legislation (e.g., the American Innovation and Choice Online Act) that is intended to regulate the same companies.
Poland Seeks EU Money and Appeasement with Brussels
CONTEXT • After being fined by the Court of Justice of the EU (CJUE) for ignoring an order to suspend the controversial disciplinary mechanism for judges and for refusing to close the border lignite mine of Turów, Poland seeks to resolve its disputes with the EU.
The Commission’s recent threat to deduct outstanding fines directly from the EU budget payments to Poland has evidently made an impression in Warsaw.
Until then, Poland had simply refused to pay its fines, which were imposed by the CJUE for ignoring an order to suspend the controversial disciplinary mechanism for judges, and for refusing to close the border lignite mine of Turów. Faced with the prospect of reduced EU payments, however, Warsaw has struck a deal with Prague over the coal mine, and the Polish president, Andrzej Duda, has put forward a bill to scrap the disciplinary chamber for judges.
AGAINST THE ORDER • On 3 February, the Polish Prime Minister Mateusz Morawiecki agreed to pay Prague €45 million and to finance measures aimed at preventing the mine from negatively affecting Czech residents. In return, Petr Fiala, the Czech Prime Minister, promised to withdraw Czechia’s lawsuit from the CJEU, which would allow Poland to continue exploiting the mine. “No judge in Luxembourg, no Brussels bureaucrat, can dictate the conditions under which we rule ourselves in Poland”, said Morawiecki during his visit to Turów. Nonetheless, it remains unclear whether the Czech withdrawal releases Warsaw from the fines imposed by the CJEU.
CONSTITUTIONAL PUZZLE • On the same day, Andrzej Duda proposed to replace the disciplinary chamber with a new Chamber of Professional Responsibility composed of eleven judges chosen by lottery and to introduce a mechanism for testing judicial impartiality. The Polish head of state believes that the bill will put an end to the dispute with the EU over the rule of law.
ALL ABOUT MONEY • The European Commission has previously made clear that Poland will have to reform its judiciary to unlock its recovery funds under the NGEU programme. Even though suspending the disciplinary chamber is one of the key components of the reform, the issue remains complex. The Commission’s spokesman, Eric Mamer, said it was too early for the EU executive to comment as it needs to see the proposal first.
What we’ve been reading this week
A blog post by Grégory Claeys and Lionel Guetta-Jeanrenaud for Bruegel — “Who is suffering most from rising inflation”.
ECFR’s Research Director Jeremy Shapiro wonders “Why Europe has no say in the Russia Ukraine crisis”.
Why are EU regulations all being called “Acts” these days, wonders Vagelis Papakonstantinou in a paper on the “act-ification of EU law” for the European Law Blog.
A policy paper by ECFR’s Jonathan Hackenbroich, with Filip Medunic and Pawel Zerka on the “hidden costs of economic coercion”.
Thanks to those who helped put this edition together — Aleksandra Wierzbicka, Gaetan du Peloux, Roemer Sijmons, Mark Soler, Briac de Charry, Leon Holly, Maxence de La Rochère, Rogier Prins, Agnès de Fortanier et Thomas Harbor. See you next week!