France Blocks Key EU Green Directive
But also — Sanctions, Microsoft, Brexit
Hi! This is Monday, 22 May 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.
On May 17 — at the last minute — France opposed the approval of the third Renewable Energy Directive (RED III), after a provisional agreement was reached with the European Parliament on March 30. Paris blocked the deal over concerns that the draft law is biassed against nuclear energy. This objection pushed the Swedish Presidency of the Council to withdraw the agreement from the agenda of the COREPER I — the Member States’ Ambassadors meeting — thus triggering numerous reactions.
CONTEXT • REDIII has been a hot topic in Brussels for months. The draft directive aims to set a binding overall target for the share of renewable energy in total energy consumption together with sectoral targets. REDIII led to very tense negotiations in both the Parliament and the Council. It took months to finally reach an informal agreement among the co-legislators on March 30.
France and other pro-nuclear countries wanted low-carbon hydrogen — particularly hydrogen from nuclear energy — to be recognised in the EU legislation. These countries pushed to include low-carbon hydrogen in several similar environmental legislations. The Parliament and Council eventually informally agreed to include ‘low-carbon hydrogen’ directly in REDIII.
RED III DEAL • The informal agreement reached on March 30 called for the overall target for renewables' share of total energy consumption in the EU to reach 42.5% by 2030. This new target almost doubles the current share of renewables in the EU (22% under current legislation).
France was adamant that ‘low-carbon hydrogen’ produced thanks to nuclear energy be included in the draft directive. The informal agreement does not directly include nuclear energy among the energies for achieving the sectoral goals. A new provision states that under certain conditions, the renewable energy target for the industrial sector can be lowered It is in this space left by the lowering of the renewable energy target that nuclear power will be allowed to develop according to the informal agreement.
In other words, France has won a symbol, but nothing concrete. Yes, nuclear power is included in a text dedicated to renewable energies. But in reality, these goals cannot be achieved and nuclear power will not benefit.
NUKE MOMENTUM • Paris sees itself as the leader of the pro-nuclear countries in Europe. French Energy Minister Agnès Pannier-Runacher launched an alliance of nuclear countries. The representatives of the Alliance held their last meeting in Paris on May 16 and signed a common statement to promote nuclear energy. Simultaneously, the French Parliament adopted a law to speed up the construction of new nuclear plants.
If Paris wants to be at the forefront of the new alliance, it must however achieve more. As Politico reports, pro-nuclear Member States that helped Paris get nuclear included in RED III have no chance of benefiting from the informal agreement as it stands. In fact, only countries that have a high percentage of nuclear energy in their energy mix can use their low-carbon hydrogen to meet the targets. So if Paris wants to consolidate the alliance, it must make more concessions.
eFUELS • This objection, raised by France at such a late stage of the legislative procedure, recalls the objection raised by Germany in March. Berlin threatened to block the adoption of the ban on fossil cars from 2035 if synthetic e-fuels were not given an exemption . At the time, this objection was heavily criticised, although other Member States joined Berlin. Eventually, the Commission and Berlin reached an agreement. Germany would support the text and the Commission will propose a delegated act.
REACTIONS • Several diplomats and MEPs criticised the French for their last-minute objection. The Austrian ambassador said on Twitter that he was “sad that we have to remove such important topics from today’s #Coreper1 agenda…. I hope we will soon be able to adopt this important part of our #climate package too. A simple truth: only #renewable energy is #renewable”.
As a reminder, Austria is an absolute opponent of nuclear energy. It is even suing the Commission for adopting the complementary delegated act recognizing gas and nuclear as transitional energies.Even the French shadow rapporteur Christophe Grudler — a strong supporter of nuclear energy — is against France’s move. According to him, there are other solutions to give nuclear energy more leeway.
FRENCH BASHING • On May 17, Politico published an article on this topic, slamming the ‘crazy” French for taking EU climate legislation hostage. This article was heavily commented on Twitter and seen as an instance of ‘French bashing’. However, the French should consider themselves lucky. When Germany postponed the adoption of the regulation on CO2 emissions of new cars, Politico published this article. The title says it all: “Germany’s e-fuel fetish ain’t new. Just ask the Führer.” Yes, they linked e-fuels to the Nazis.
NEXT STEPS • Now the Member States have to find a way to pass the informal agreement into law. That will be no easy task, as it looks like both supporters and opponents of nuclear power plants could form a blocking minority. In the European Parliament, committee and plenary votes have been postponed until the Council reaches a clear position.
In Case You Missed It
SANCTIONS • The G7 leaders, meeting in Hiroshima, Japan, agreed on a very offensive communiqué on China, particularly with regard to its relationship with Russia, the situation in the South China Sea, and the use of economic coercion against third countries, against which the EU is developing a new anti-coercion instrument (ACI).
Within the EU itself, finding a united position is difficult, the latest example being on secondary sanctions. The 11th sanctions package, proposed in early May, aims to prevent the circumvention of EU sanctions via third countries in defined sectors — dual-use goods, advanced technologies, and critical materials. Germany, Greece and Hungary are opposed to a decision that is too abrupt. Decisions on sanctions must be taken unanimously by the 27 Member States.
China has already been very vocal in its opposition to the proposal, which would target, among others, companies supplying components to the Russian military. The imposition of secondary sanctions could also sour relations with India, with which the EU is trying to intensify its trade relationship but which is taking advantage of Western sanctions against Russia to import Russian oil and resell it at a profit.
At the first meeting of the EU-India Trade and Technology Council, held in Brussels on May 16, the Indian foreign minister denied taking advantage of Western sanctions. A neutral state in the Russian-Ukrainian war, India has not imposed sanctions on Russia.
MICROSOFT / ACTIVISION • Last Monday, Microsoft obtained the European Commission's approval for its $69 billion takeover of Activision. This deal had already been prohibited by the UK antitrust regulator. The two authorities differ in their assessment of the importance of the cloud gaming market and in particular of its short-term dynamics.
The UK’s Competition & Markets Authority (CMA), believing that the cloud gaming market has already been launched, considers that Microsoft's acquisition of Activision "would change the future of the rapidly growing cloud gaming market".
Microsoft's remedy offer to licence games for 10 years to competing platforms has reassured the services of DG Competition and "will significantly improve the conditions for the dissemination of cloud gaming compared to the current situation," according to Margrethe Vestager. Microsoft will appeal the decision of the CMA.
BREXIT • On May 17, the Commission announced that it had adopted a draft memorandum (MoU) providing for future regulatory cooperation with the United Kingdom on financial services. The MoU, which is in draft form, must still be validated by the 27 in the Council of the EU before it can be signed by the Commission. The MoU creates a framework for regulatory dialogue between the EU and the UK, but there is nothing in the text about access to the EU market for UK firms (and vice versa), nor does it prejudge the decision to adopt equivalence decisions that give access to the EU market.
What we’ve been reading
In his Bloomberg column, Tyler Cowen argues that deregulation, rather than antitrust law, can be the answer to monopolies.
In VoxEU, Carmine Di Noia explains that to grow European capital markets, policymakers must understand the forces that drive them.
To protect its interests in the midst of the US-China rivalry in technology, Europe must adopt an appropriate strategic doctrine and adapt its export controls, write Tobias Gehrke and Julian Ringhof for the ECFR.
This week’s newsletter is brought to you by Marwan Ben Moussa, Augustin Bourleaud and Maxence de la Rochère. See you next Monday!