The European Commission will examine whether the big tech companies are preventing developers from steering customers away from controlled app stores, which could be anti-competitive.

The investigation comes under powers introduced in the Digital Markets Act (DMA) which was a landmark piece of legislation aimed at curbing the power of big tech and the commission is accusing companies of non-compliance with the act and a failure to provide a fairer and more open digital space for European citizens and businesses.

Should the investigation conclude that there is lack of full compliance with the DMA, gatekeeper companies could face heavy fines.

Designated as ‘gatekeepers’ by the DMA, Google owner Alphabet, Amazon, Apple, TikTok owner ByteDance, Meta and Microsoft have special responsibilities because of their dominance of key mobile technologies.

These companies are accused of steering developers away from competitor platforms and imposing various restrictions and limitations on their use.

The big tech companies are facing a growing legal backlash and last month Apple was fined over its iOS ecosystem and business practices by the EU.

Whether this case succeeds of not, it’s interesting to note the growing willingness of the authorities to take these tech giants to court.

About time, according to some critics.

Source: New Electronic

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“Today, the Commission has opened non-compliance investigations under the Digital Markets Act (DMA) into Alphabet’s rules on steering in Google Play and self-preferencing on Google Search, Apple’s rules on steering in the App Store and the choice screen for Safari and Meta’s ‘pay or consent model,’” the European Commission said in a statement.

The first two probes focus on Alphabet and Apple and relate to so-called anti-steering rules. Under the DMA, tech firms are not allowed to block businesses from telling their users about cheaper options for their products or about subscriptions outside of an app store.

“The way that Apple and Alphabet’s implemented the DMA rules on anti-steering seems to be at odds with the letter of the law. Apple and Alphabet will still charge various recurring fees, and still limit steering,” the E.U.’s competition chief, Margrethe Vestager, said Monday at a news conference.

Apple has already fallen foul of the E.U.’s rules. This month, the company was fined 1.8 billion euros ($1.95 billion) after the European Commission said it found that Apple had applied restrictions on app developers that prevented them from informing iOS users about alternative and cheaper music subscription services available outside of the app.

In a third inquiry, the commission said it is investigating whether Apple has complied with its DMA obligations to ensure that users can easily uninstall apps on iOS and change default settings. The probe also focuses on whether Apple is actively prompting users with choices to allow them to change default services on iOS, such as for the web browser or search engine.

The commission said that it is “concerned that Apple’s measures, including the design of the web browser choice screen, may be preventing users from truly exercising their choice of services within the Apple ecosystem.”

Apple said it believes it is in compliance with the DMA.

“We’re confident our plan complies with the DMA, and we’ll continue to constructively engage with the European Commission as they conduct their investigations. Teams across Apple have created a wide range of new developer capabilities, features, and tools to comply with the regulation,” an Apple spokesperson told CNBC on Monday.

The fourth probe targets Alphabet, as the European Commission looks into whether the firm’s display of Google search results “may lead to self-preferencing in relation to Google’s,” other services such as Google Shopping, over similar rival offerings.

“To comply with the Digital Markets Act, we have made significant changes to the way our services operate in Europe,” Oliver Bethell, director of competition at Alphabet, said in a statement.

“We have engaged with the European Commission, stakeholders and third parties in dozens of events over the past year to receive and respond to feedback, and to balance conflicting needs within the ecosystem. We will continue to defend our approach in the coming months.”

Alphabet pointed to a blog post from earlier this month, wherein the company outlined some of those changes — including giving Android phone users the option to easily change their default search engine and browser, as well as making it easier for people to see comparison sites in areas like shopping or flights in Google searches.

Meta investigation

The fifth and final investigation focuses on Meta and its so-called pay and consent model. Last year, Meta introduced an ad-free subscription model for Facebook and Instagram in Europe. The commission is looking into whether offering the subscription model without ads or making users consent to terms and conditions for the free service is in violation of the DMA.

“The Commission is concerned that the binary choice imposed by Meta’s ‘pay or consent’ model may not provide a real alternative in case users do not consent, thereby not achieving the objective of preventing the accumulation of personal data by gatekeepers.”

Thierry Breton, the E.U.’s internal market commissioner, said during the news conference that there should be “free alternative options” offered by Meta for its services that are “less personalized.”

“Gatekeepers” is a label for large tech firms that are required to comply with the DMA in the E.U.

“We will continue to use all available tools, should any gatekeeper try to circumvent or undermine the obligations of the DMA,” Vestager said.

Meta said subscriptions are a common business model across various industries.

“Subscriptions as an alternative to advertising are a well-established business model across many industries, and we designed Subscription for No Ads to address several overlapping regulatory obligations, including the DMA. We will continue to engage constructively with the Commission,” a Meta spokesperson told CNBC on Monday.

Tech giants at risk of fines

The commission said it intends to conclude its probes within 12 months, but Vestager and Breton during the Monday briefing stressed that the DMA does not dictate a hard deadline for the timeline of the inquiry. The regulators will inform the companies of their preliminary findings and explain measures they are taking or the gatekeepers should take in order to address the commission’s concerns.

If any company is found to have infringed the DMA, the commission can impose fines of up to 10% of the tech firms’ total worldwide turnover. These penalties can increase to 20% in case of repeated infringement.

The commission said it is also looking for facts and information to clarify whether Amazon may be preferencing its own brand products on its e-commerce platform over rivals. The commission is further studying Apple’s new fee structure and other terms and conditions for alternative app stores.

This month, the tech giant announced that users in the E.U. would be able to download apps from websites rather than through its proprietary App Store — a change that Apple has resisted for years.

The E.U.’s research into Apple and Amazon does not comprise official investigations.

Source: NBC News

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From the European Union’s Green Deal Industrial Plan and the United States’ Inflation Reduction Act (IRA) to Japan’s Green Growth Strategy and the Korean New Deal, industrial policies aimed at accelerating the energy transition are proliferating in wealthy, technologically advanced economies.

Many developing economies are also designing and deploying state-led projects to foster green industrialisation, as competition intensifies for electric vehicles (EVs), so-called transition minerals, and clean energy.

For example, several African countries, including South Africa, Kenya, Mauritania, Egypt, Djibouti, Tunisia, Morocco, and Namibia, have enacted state-led initiatives to support the development of green hydrogen. Others, including Indonesia, Bolivia, and Chile, are implementing national strategies to stimulate industrialization based on the extraction and processing of nickel, cobalt, copper, lithium, and other transition minerals and metals.

These policies use a broad range of instruments – including subsidies, regulations, incentives, and diverse state-business arrangements – and differ widely in terms of the public and private resources at their disposal. But they all seek to tackle three crises simultaneously: economic stagnation, polarised and precarious employment, and intensifying climate change.

The revival of industrial policy is based on the logic that addressing all three crises will create a virtuous cycle: targeted investment in green manufacturing and energy will boost economic activity, create well-paying jobs, and usher in a low-carbon economy. The Biden administration’s “modern American industrial strategy,” comprising the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the IRA, exemplifies this approach. What has been called the “Biden three-fer” is designed to boost US competitiveness in key industries vis-à-vis China, provide better economic opportunities for American workers, and accelerate decarbonization.

But the win-win narrative undergirding these new industrial strategies tends to obfuscate the risk that solving one problem may exacerbate another. In fact, the tensions between these policy objectives are already visible. For example, the decarbonisation of the economy may not create as many decent jobs as initially expected. In the US, both car companies and the United Auto Workers union have warned that the shift to manufacturing EVs, which require fewer parts, could lead to job losses. Some of these jobs will be redistributed to battery production, but this may be cold comfort for American and European auto workers, given China’s dominance over the global battery supply chain.

At the same time, the growth of green industries can result in other environmental harms. Despite aiming to generate employment and value through the production of transition minerals, the industrialisation strategies of several Global South countries tend to entrench extractive practices. For example, Argentina, Bolivia, and Chile – South America’s “lithium triangle” – are seeking to capture various stages of the lithium supply chain, from mineral extraction to processing to battery assembly. But the growth of this industry threatens to deplete water supplies, degrade soil, and disrupt habitats, often in zones inhabited by indigenous Andean peoples. Similarly, the production of semiconductors, which are at the heart of clean tech, is energy-, water-, and land-intensive and releases perfluorocarbons and other potent greenhouse gases into the atmosphere.

Finally, economic stagnation can have a destabilising impact on domestic politics, impelling governments to aim for a higher growth rate regardless of the environmental costs. For example, British Prime Minister Rishi Sunak recently announced a series of U-turns on the government’s net-zero pledges. Shedding burdensome climate commitments may seem like a politically attractive strategy to boost immediate growth prospects. But – and herein lies the contradiction – longer-term growth will at least partly depend on governments ensuring that their economies are competitive in the green industries of the future.

As these examples show, industrial policy is not a silver bullet for the intersecting crises of our times. The policy objectives of environmental sustainability, industrial dynamism, and full employment are difficult to reconcile and require hard political choices about resource allocation, strategic priorities, and, crucially, the distribution of economic and social costs. Moreover, the trade-offs will grow more complex and challenging as global warming worsens and growth continues to sputter. What we call the “wicked trinity” of contemporary governance – climate catastrophe, economic stagnation, and surplus humanity – will not go away anytime soon. In fact, it will likely shape the trajectories of public policymaking long into the future.

This is not to say that policymakers should give up on designing ambitious strategies to address these crises. On the contrary, swift and effective action is an absolute necessity. Yet packaging these plans in win-win narratives that paper over the difficult trade-offs they involve significantly raises the risk that governments will lose popular support. The complex and conflicting nature of these policy objectives means that even the best-designed strategies will fall short, at least in some respects. This is unavoidable and an important component of learning-by-doing.

To avoid being seen as breaking promises, policymakers must embrace, rather than dismiss, the tensions and trade-offs at the heart of green industrial policies and subject them to public deliberation. This is essential to securing broad support for state-led decarbonisation projects. Such an approach would help build robust, transparent governance structures rooted in the principles of democratic deliberation and public oversight and control. As matters stand now, many industrial strategies are the product of top-down, technocratic policymaking processes, despite all the talk of “leaving no community behind” and a “just green transition.”

Subjecting the economy to democratic decision-making in this way would, admittedly, constitute a radical challenge to the current system of private ownership and market coordination. But it is essential to secure and maintain popular legitimacy for green industrial policies, as well as to facilitate collective and efficient decision-making and minimise mismanagement. Otherwise, we risk a public backlash that impedes the collective action needed to safeguard our future on this planet.

Source : The Independent

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Startups can be at the forefront of economic recovery, job creation, and a more sustainable future. They are the most innovative actors in the economy and an economic force to be reckoned with. However, while they are the giants of the future, they are more often than not overlooked in policymaking. 

In the last five years alone, startups have been met with a tidal wave of digital regulation. While well-intentioned, overregulation often creates a hostile environment for innovative businesses by implementing market barriers and imposing additional operating and compliance costs.

The 2024 European Union Elections offer an opportunity to reverse this trend by ensuring that startups have a seat at the policy table so that Europe can build smart regulations and at the vanguard of startup innovation.  

Allied for Startups and its Members have published its EU Election Startup Manifesto, a standard with which startup communities and leaders will evaluate the success of any candidate, party, or group seeking a leading role in a democratic Europe in 2024.

While these policy prescriptions are a baseline of the needs of the growing entrepreneurial communities of Europe, support for these entrepreneurs and job creators must be aligned with an acknowledgment of the need for further investment in diversity, equity, and inclusion.

This integrated approach is likely the most effective pathway toward ensuring Europe’s continued growth and economic success.

What do startups need from policymakers?

Policymakers must embrace strategies and initiatives that will foster a growth-oriented environment for startups to deliver on the digital and green transitions as promised.

Hence, we propose a variety of actions, including:

Appointing a dedicated Commissioner for Digital Entrepreneurship, in order to simplify and harmonise all regulation that affects startups in a single place.

Introducing a startup and scale-up test for legislation, essential to creating regulatory frameworks that startups can not only comply with but thrive under.

Streamlining talent acquisition through an efficient EU-wide startup visa and simplifying regulatory processes with an EU company status.

Startups advocate for a harmonised level-playing field that allows them to innovate, emphasizing the importance of safeguarding net neutrality, fortifying the Digital Single Market, and strong research, investment and digital skills framework to nurture a competitive and thriving ecosystem.

What are startups’ expectations across EU institutions?

Startups’ expectations across EU institutions extend to the creation of dedicated groups and teams within the institutions, integrating startup perspectives into relevant deliberations, nominating counterparts, and emphasizing startups and SMEs in official titles.

Effectively, having a seat at every policy table.

While a new Parliament is on the ballot next year, startups recognize the importance of and positive outlook for all EU institutions to build a sustainable, lucrative future for European startups.

Prioritising startups’ needs during this election season holds the potential to transform Europe into an environment where innovation thrives, startups prosper, and Europe secures a prominent role in the global entrepreneurial landscape.

With these 10 items at the forefront of voter outreach and discussion, Europe can re-emphasise its commitment to building a strong startup community and lead the global economy.

Source : Tech EU

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The EU foreign policy chief on Wednesday said that he is “appalled” by the high number of casualties caused by Israeli airstrikes on the Jabalia refugee camp in northern Gaza.

“Building on EU Council’s clear stance that Israel has the right to defend itself in line with international humanitarian law and ensuring the protection of all civilians, I am appalled by the high number of casualties following the bombing by Israel of the Jabalia refugee camp,” Josep Borrell said on X.

“The right to self-defence should always be balanced by the obligation to spare civilians to the greatest extent possible,” Borrell said, echoing UN Secretary-General Antonio Guterres’ remarks.

Underlining that the EU has been calling since last week for humanitarian corridors and pauses for humanitarian needs, he said: “With each passing day, as the situation becomes more and more dire, this is more urgent than ever.”

“The safety and the protection of civilians is not only a moral, but a legal obligation,” he stressed.

Airstrikes on the refugee camp killed and injured hundreds of people, according to the Interior Ministry in the besieged enclave, which said Israel dropped six bombs on the residential area.

The Israeli army has expanded its air and ground attacks on the Gaza Strip, which has been under relentless airstrikes since the Palestinian group Hamas launched a surprise cross-border offensive on Oct. 7.

Paltel Group, the company providing communications services in Palestine, reported another widespread outage of internet and phone service in Gaza early Wednesday.

Besides a large number of casualties – at least 8,525 Palestinians and 1,538 in Israel – and displacement, basic supplies are running low for the 2.3 million people in Gaza.

Israeli Prime Minister Benjamin Netanyahu has rejected growing calls for a cease-fire, saying it would be a “surrender” to Hamas and “that will not happen.”

Source : AA

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President Volodymyr Zelenskyy has stated that Ukraine needs to get used to the fact that the country’s policies are bringing it closer to the moment when the Ukrainian flag will be hoisted alongside the flags of other EU member states in Brussels.

Quote: “Ukraine has walked a very long path – from a point where many didn’t believe in the possibility of our alignment with the European Union during a full-scale war, to achieving the status of a candidate country at record speed and fulfilling the necessary prerequisites for opening negotiations.

This is proof, time and time again, that Ukraine can accomplish significant achievements when we work in a united and confident manner, in the interests of our independence and of all Ukrainians…

All of us in Ukraine now need to get used to the fact that our domestic policy is a policy of European integration, and that is what is bringing us closer to the moment when the Ukrainian flag will be flying in Brussels alongside the flags of all the other EU member states.”

Details: Zelenskyy added that his team is doing everything possible to be ready for full accession to the European Union and to adapt all institutions and standards to European rules.

Source : Yahoo

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In our introductory remarks, we revisited the “European Union is in the Arctic” statement from the EU’s 2021 Joint Communication on A stronger EU engagement for a peaceful, sustainable and prosperous Arctic. If the EU is indeed in the Arctic, how have various Arctic stake- and rights-holders – from Member States to Indigenous communities – perceived the Union’s Arctic engagement over the past 15 years? With our Series on the European Union’s Arctic Policy – From a Stakeholder Perspective, we wanted to contribute to a better understanding of the EU’s Arcticness by exploring the interlinkages between the EU’s Arctic policy and actions, and the views, ideas and approaches of EU Member States and other stake- and rights-holders.

A policy in the constant process of making

As of today, there seems to appear to be an ongoing perception that the EU’s Arctic policy continues to be troubled by fragmentation and a lack of comprehensive knowledge basis for decision-making among European policy-makers. This does not necessarily refer to the policy itself but rather to the broader spectrum of EU legislative and funding initiatives that affect the Arctic regions on a broader level. The EU has certainly made much progress in that respect over the past 15 years, regularly commissioning reports supporting its policymaking, engaging stake- and right-holders and the research community in programming development and territorial cooperation funding and in science prioritization. One proposal in our series aimed at further addressing these policy-making challenges to introduce greater systems thinking and apply related analytical tools towards designing a more coherent EU presence in the Arctic. Some contributors also proposed to engage with Arctic Indigenous Peoples in a long-term process of co-production of knowledge that underlies EU Arctic policy-making.

Engaging Arctic Indigenous Peoples

The interactions with Indigenous Peoples and especially the Sámi have been in fact one of the features of the EU’s Arctic policy for over a decade. The position of the Sámi in the EU’s policy-making both in general and specifically in the context of the Arctic policy is, however, a peculiar one. The EU has developed a comprehensive approach to Indigenous Peoples’ rights and interests in its development cooperation with the Global South. This comprehensive approach, however, is not reflected in the EU’s internal actions and policies.

At present, one of the greatest challenges for the EU-Sami relations is the pursuit of low carbon transition, which requires the expansion of renewable energy production and increased extraction of critical minerals. Within Europe, northern Fennoscandia is likely to be one of the focus areas for these developments. The expansion of these green industries can contribute to regional development but also affects the traditional livelihoods of the Sámi and other forms of land use in the region. The EU is not responsible for permitting processes and local economic planning, but drives developments via its policies and funding. EU institutions could therefore contribute to establishing a framework for green growth that respects the rights of Indigenous Peoples and advances genuine participatory processes, including the possibility to abandon projects that cannot be reconciled with critical values and human rights. Here, authors proposed that the EU’s internal policy on Indigenous Peoples’ rights, including the principle of free, prior and informed consent has to be a part of the solution.

Supporting or competing with Member States?

Ever since the Commission’s first Communication on Arctic matters from 2008, various Member States – both Arctic and non-Arctic – have also presented, articulated and communicated their Arctic ideas. Our series revealed that while there is an interest by some Member States for a stronger role at the EU level in selected areas (research programmes and funding, sustainable regional development, and fisheries), discrepancies nevertheless remain between the Union’s Arctic policy itself and the various regional approaches by regionally-interested Member States.

From a Finnish perspective, the EU should adopt a more elaborate and targeted approach towards Finland and the European Arctic if the Union wants to effectively address the complex challenges posed by the Arctic environment, mitigate potential risks and externalities, and enhance its preparedness for geopolitical developments. This is especially salient due to Finland’s political setting as Russia’s Arctic neighbor, which was affected by the war on Ukraine, the changed geopolitical situation in northern Europe, as well as by the fallout of crumbling Russia-West relations on the Finnish economy and on cross-border interactions. This means, among others, adjusting investment priorities, repurposing funding programmes, and considering the Finnish-Russian frontier from the perspective of the EU and Europe as a whole, including in carrying out strategic foresight efforts.

Science diplomacy and the role of scientific advice in Arctic policymaking was key to our Series’ contribution on Italian Arctic dilemmas. Here, the author suggested that if Italy aims to pursue its goals in the Arctic in unisono with the European Union, the country needs to adjust its environmental goals for the region, or better justify its regional position in terms of the future use of Arctic resources.

The Estonian policy towards the Arctic is in the process of elaboration and the country eyes involvement in the work of the Arctic Council, although the war in Ukraine has removed the opportunities for accepting new observers far into the future. The distinct feature of Estonia’s approach to the EU’s Arctic engagement is the emphasis on the possible EU Arctic policy contributions to enhancing political and environmental security of Europe and Baltic region in relation to the developments taking place in the Arctic.

Dealing with the Russian Federation

The relationship with Russia has always played a central role in the EU’s thinking about the Arctic (albeit not necessarily emphasized prominently in the Union’s Arctic policy statements), even if cooperation venues have been limited when compared to interactions with other Arctic states and stakeholders across the European Arctic. Currently, even these relatively limited cooperation venues have collapsed following Russia’s invasion of Ukraine in February 2022. As such, Russian partners have been shut out of the Northern Dimension and the EU’s cross-border projects. However, the Arctic can still be seen as one of those policy areas where Russia and the EU could start to work together again, if and when the war in Ukraine and mutual sanctions arrive at some kind of resolution.

What’s next on the EU’s Arctic agenda?

In the coming years, the EU’s presence and activities in the Arctic, as well as its related engagement with Arctic policy-makers, stake- and rights-holders can be expected to be driven by several factors. First, the ongoing war in Ukraine will affect Arctic cooperation and the economic and political developments in the region. While the Arctic Council work has resumed in a very limited format (with the capability of this format to deliver any concrete outputs being unknown), Russia has just recently left the Barents Euro-Arctic Council. Formal scientific cooperation remains all but frozen. The accession of Finland and soon possibly Sweden to NATO and the stronger involvement of the EU in defense policy is bound to create additional challenges for future cooperation. A second factor concerns the question of the progression of European Green Deal policies on the Union’s Arctic engagement. Increased focus on green transition investments can easily fuel tensions linked to renewable energy and mining industries, affecting various Arctic actors’ perceptions of the EU as a regional stakeholder. Third, after the 2024 European Parliament elections, we will see a new political set-up in EUrope, with a new European Commission potentially adopting a different list of priorities. As such, the EU is also bracing for a possible new wave of populist resurgence in several Member States, with hard to forecast implications for the EU’s presence in the Arctic in the long-term. In addition, the 2024 US presidential elections and the federal elections in Canada (taking place the latest in October 2025) may affect the EU’s relations with the two key Arctic partners as well. Fourth, it is difficult to envisage that EU Member States become opposed to the EU’s Arctic engagement or the EU’s investments in Arctic objectives. However, the level of investment will be affected by the more general discussions and Member States governments’ positions on the EU’s budget and programmes. The discussion – which has already started – on the EU’s Multiannual Financial Framework after 2027 will show whether a European Union that is facing multiple crises, can retain its current level of interest and involvement in Arctic affairs. Finally, the 2021 Joint Communication highlighted the need for the EU to develop stronger strategic foresight related to Arctic developments, especially in relation to the high pace of climate change in the region. Considering the discussed multiple drivers and the high level of uncertainty, the ability and willingness to engage and take account of such strategic foresight has become more important than ever before.

Source : The Arctic Institute

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When EU lawmakers voted to ban the sale of new combustion engine cars in the bloc by 2035, it was a landmark victory for climate. In February, the European Parliament approved the law. All that was needed was a rubber stamp from the bloc’s political leaders.

Then Germany changed its mind.

In a reversal that stunned many EU insiders, the German government decided to push for a loophole that would allow the sale of combustion engine cars beyond the 2035 deadline — as long as they run on synthetic fuels.

It’s an exception that could put the European Union’s green credentials at risk. The bloc is legally obliged to become carbon-neutral by 2050. With cars and vans responsible for around 15% of its total greenhouse gas emissions, a phase-out of polluting vehicles is a key part of EU climate policy.

Here’s what’s at stake.

What is happening?

The ban on internal combustion engine cars is one of the centerpieces of the European Union’s ambitious plan to cut its emissions to net zero by 2050 — which means removing from the air at least as much planet-heating pollution as the bloc emits.

The law envisions a total ban on the sale of new diesel and gasoline cars by 2035. The European Union argues that the deadline is necessary because the average car’s lifespan is around 15 years — so to get a fleet that produces no carbon pollution by 2050, sales of combustion engine cars must end by 2035.

Germany is now pushing against the idea that all internal combustion engines must be banned. Instead, it says engines powered by “green” fuels should be allowed.

Other European countries, including Italy, Poland and the Czech Republic, have joined Germany in demanding the exception.

The law was meant to be formally approved by the European Council — the European Union’s top political body — earlier this month, but the vote was postponed because of the growing opposition.

What are e-fuels?

Synthetic fuels, or e-fuels, are made using hydrogen and carbon dioxide captured from the atmosphere.

Their proponents often portray them as “clean”, but the reality is not straightforward. Burning these man-made fuels releases similar amounts of planet-heating emissions and air pollutants as using conventional fossil fuels.

The “green” credentials refer to the manufacturing process: e-fuels are made from carbon that was removed from the atmosphere, which offsets the emissions they produce.

For climate campaigners and the lawmakers who negotiated the new rules, this is not good enough.

“The text is very clear,” Dutch EU lawmaker Jan Huitema told CNN. “We only allow cars on the market as long as there are zero emissions from driving them. E-fuels emit carbon dioxide from the tailpipe. They will not be allowed.”

There are other problems too. For one, e-fuels are not yet produced at scale. The manufacturing process is expensive and requires a lot of renewable energy.

Supply of e-fuels is likely to be limited for some time, and critics say they should be reserved for industries that do not have a viable alternative to fossil fuels, such as aviation and shipping.

What has been the reaction to the new demands?

Many EU policy makers were flabbergasted by the demands from Germany and others. The legislation had been in the works for more than two years and had required many rounds of negotiations.

“I was the lead negotiator with the [European] Council on the final text, it was adopted there by the ambassadors of the different member states,” Huitema said. “You have an agreement and now, all of a sudden, a couple of member states want to refrain from the agreement. That is not how you negotiate and how you make deals with each other.”

Climate groups say the changes would water down action on climate change.

Transport & Environment, a clean transport campaign group, said the loophole for e-fuels would slow down the transition to electric vehicles.

“[Germany’s] plan would derail the decarbonization of the new fleet while allowing more conventional oil to be used in the existing fleet post-2035 — a win-win for Big Oil.”

Even some carmakers have come out against the potential changes to the law.

A group of dozens of companies including Volvo and Ford have penned an open letter to the European Union, pushing against the exception.

“First-mover companies have already significantly invested in zero-emission vehicles and should be rewarded for taking the inherent risks to decarbonize their fleet. It would be a very negative signal to reverse the political agreement reached last year,” they said.

What is behind Germany’s last-minute objections?

Germany is governed by a coalition, and it is one of the parties, the liberal FDP, that is calling for the changes.

“The internal combustion engine is not the problem. The fossil fuels that run it are,” German transport minister Volker Wissing, of the FDP, said on Twitter earlier this month. “The goal is climate neutrality, which is also an opportunity for new technologies. We need to be open to different solutions,” he added.

Germany is home to some of the world’s largest automakers, including BMW, Mercedes-Benz, Audi and Volkswagen, and the government has to walk a tightrope between ambitious climate policies and the interests of a powerful industry that keeps the economy humming.

Manufacturers of car components and engines, fossil fuel producers and fuel transportation companies have been lobbying for the exception because it would allow them to continue using their existing infrastructure and products.

The Federation of German Industries, a lobby group, said e-fuels could make “a major contribution to achieving the adopted climate targets.”

“Since they can be used immediately without having to build a new infrastructure, they can also be implemented in economically less developed countries,” according to a statement on the group’s website.

The dispute over the legislation is causing friction within Germany’s government.

Environment Minister Steffi Lemke of the Greens, another coalition party, has criticized the challenge to the law.

“Germany should remain a reliable partner to its EU partners. The new CO2 fleet regulation for passenger cars and light commercial vehicles, which Germany has supported in recent months, is a major step forward for European climate protection,” she said in a statement earlier in March.

It all sounds very technical. Why is it important?

If passed, the law would be one of the world’s strongest measures to phase out gasoline vehicles.

Scientists say reducing planet-heating pollution is non-negotiable if the world is to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial levels and avoid a key tipping point beyond which extreme flooding, droughts and wildfires will likely become much more frequent.

Despite such warnings and the pledges made in the Paris Agreement to tackle climate change, global emissions have continued to rise, barring a dip in 2020.

Talks are continuing to persuade Germany to support the law. In its current draft form, the law would allow cars running on e-fuels to be sold after 2035, but only if they were fitted with technology preventing them from running on gasoline or diesel.

Whether Germany will accept the proposal remains unclear.

Some are concerned that the dispute casts doubt on the European Union’s ability to implement its ambitious climate agenda.

“This debate is really destabilizing,” said Elisa Giannelli, a senior policy advisor at E3G, a climate think-tank, noting that the European Union had been “on track for climate neutrality.”

“Backtracking on a piece of legislation is potentially really undermining the credibility of what we’ve achieved over the past years,” she said.

“It’s not just about cars. It’s about the political signals that that [dispute] sends.”

Source : CNN

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There are many changes coming to Washington, D.C., now that Republicans have taken control of the U.S. House of Representatives. Uncertainty surrounds President Biden’s ability to pass his economic agenda through a divided Congress and few can predict the path U.S. tax policy will take at home or abroad.

However, despite a bleak outlook for a domestic bipartisan legislative agenda, it is important for U.S. policymakers to realize that the rest of the world continues to legislate. In particular, the European Union will continue to implement tax and trade policies that affect the American economy. Without a legislative response, American consumers and companies may find themselves on the losing end of EU policies.  

It is equally important for U.S. policymakers to understand why the EU has been pursuing seemingly protectionist policies such as the Carbon Border Adjustment Mechanism (CBAM) or Digital Services Taxes (DSTs), and what transatlantic policy outcomes the EU hopes to achieve with their American counterparts. Therefore, to grasp where EU policymakers are coming from, U.S. policymakers should review the theoretical underpinnings of the Transatlantic Trade and Investment Partnership (T-TIP) before racing to a tit-for-tat protectionist response.  

What Was T-TIP?

The Transatlantic Trade and Investment Partnership (T-TIP) was a failed free-trade deal negotiated under the Obama administration between the United States and European Union.

According to the Office of the United States Trade Representative (USTR), T-TIP “would be a cutting-edge agreement aimed at providing greater compatibility and transparency in trade and investment regulation, while maintaining high levels of health, safety, and environmental protection.” It would also “help to promote U.S. international competitiveness, jobs and growth.”

For the European Commission, T-TIP was a tool to boost jobs and investment in the EU by reducing regulatory barriers between allies.

However, for both the U.S. and EU, there was a larger goal for T-TIP. By harmonizing “western” standards across a wide range of industries, the allies would not only ease the compliance burden on companies to boost trade and investment, but also “provide the basis for global standards.”

These standards would then be used to require other geopolitical players, like China or Russia, to abide by western standards or risk losing the ability to trade with economically powerful nations. Especially considering the World Trade Organization’s failures to enforce international trade rules, this strategy was designed to put USTR and the European Commission back in control of rules-based trade enforcement.

Why Did T-TIP Fail?

T-TIP failed for multiple reasons; however, two trends rose to the top during the negotiations and have continued to affect U.S.-EU relations ever since.

For one, the European public became skeptical of the EU’s ability to negotiate a trade deal with the U.S. that maintained what they perceived to be higher EU standards. The public feared a standards “race to the bottom” driven by U.S. companies and lack of government oversight. Therefore, it became difficult for EU policymakers to gather public support for the deal and fueled public mistrust of the American corporate community.

Secondly, President Trump came to power in 2016 and altered the direction of U.S. trade policy. Not only did the U.S. discontinue T-TIP negotiations, but the Trump administration also placed multiple tariffs on the EU. It wasn’t until November of 2021 that steel and aluminum tariffs were rolled back under President Biden.  

EU Trade Strategy Post-T-TIP

Since learning domestic and international lessons from T-TIP’s failure, policymakers in Brussels have adapted their trade (and tax) strategy vis-à-vis the U.S.

The underlying premise remains the same: the EU wants to counter Chinese economic power, and protect European standards, by working with the U.S. to set global standards across industries and relying on access to its powerful economic markets to drive change in other countries.

However, the EU has adapted by realizing that, to gather domestic support for a trade deal with the U.S., the EU needs to enshrine high European standards into EU law first.

Furthermore, it is not obvious that U.S. trade strategy includes working with the EU as it did under the Obama administration. Therefore, the EU has included financial incentives (or penalties) on U.S. companies doing business in the EU with the hope of convincing the U.S. to come back to the trade deal negotiating table.

Until the U.S. returns, the EU will continue to implement European standards across industries into EU law and penalize the U.S. for not conforming. By doing so, the EU thinks it can benefit from the extra revenue from protectionist trade policies while positioning itself as the first mover in global standard-setting. It could also raise the geopolitical profile of the EU through trade and leverage the EU’s Single Market in a way that is familiar to U.S. trade officials of a previous era.

EU Issues for Congress in 2023

There are three main EU tax and trade issues that Congress should keep an eye on in 2023.

One, the EU agreed to implement a CBAM tariff that will apply to U.S. producers importing carbon-intensive goods into the EU. While the tariff won’t begin until 2026, policymakers should continue working on pro-growth solutions for U.S. carbon pricing.

Second, the EU unanimously agreed to implement Pillar Two of the OECD’s global tax deal and set a 15 percent minimum tax in the EU. Most countries expect to have the ability to start taxing companies that are not paying a 15 percent rate by 2024 and this could seriously begin to impact U.S. companies in 2025 when the Undertaxed Profits Rule (UTPR) kicks in. Therefore, Congress needs to devise a strategy to either adopt Pillar Two or another domestic tax regime that avoids a complicated mess for U.S. companies.

Finally, the EU is expecting to introduce legislation to implement Pillar One sometime this year (assuming a final agreement is reached at the OECD). EU officials have made clear that if Pillar One fails in the EU or U.S., DSTs will be back on the table in the EU. Congress should consider what to do in either scenario.

In all these tax policy areas, it is essential for Congress to build a long-term strategy to support U.S. economic growth. Once Congress has a comprehensive strategy, it will be in a much stronger position to negotiate joint tax and trade ideas with the EU.

Risks to the EU Tax and Trade Strategy

While the EU sees financial penalties on U.S. companies as a way to pressure the U.S. government back to the negotiating table, it is important that the EU doesn’t overplay its hand by driving private investment away from the EU in the meantime.

According to Tax Foundation’s International Tax Competitiveness Index, many European tax codes are presently less competitive than the U.S. tax code. This means that there is already a disadvantage to companies investing in the EU relative to the U.S.

Furthermore, while subsidies for American industry certainly do not qualify as principled, pro-growth tax policy, a tipping point was seemingly exposed by the increased European temptation to move production to the U.S. to benefit from the Inflation Reduction Act tax credits.   

On top of that, most of the EU’s recent tax and trade policies are not designed in a principled, pro-growth manner. CBAM, for example, does not give European producers an export rebate for carbon emissions purchased in the EU on products sold in a third country. This makes European products less competitive in foreign markets and may tempt European producers to move production of carbon-intensive goods to less burdensome jurisdictions.

In addition, depending on how EU countries implement Pillar Two, there may be U.S.-EU disputes about taxing rights on American companies in the EU.

Finally, if Pillar One is not implemented, European DSTs will return to punish mostly U.S. tech companies.

All these policies leave room for the EU to lose important private investment due to an already uncompetitive business environment and the possibility of facing punitive trade measures from the U.S. The EU would be wise to realize that European standards only matter to partners who trade with the EU, and partners will only trade or invest in the EU if economic growth is a priority.    

The Future of U.S.-EU Tax and Trade

The EU’s unilateral approach with carbon taxes, faster track on the global minimum tax, and threat of renewed efforts on DSTs means that U.S. policymakers face some hard choices. Policymakers on both sides of the Atlantic should keep in mind pro-growth tax and trade principles that promote a rules-based international order and increase opportunity.

The U.S. still has the chance to work with the EU and be a global leader on standards and free trade. However, it will require policymakers to decide who the real adversary is—the party on the other side of the aisle, the EU, or bad international actors like China and Russia. Only then will policymakers aim for solutions that put pro-growth tax and trade policy over tit-for-tat protectionism.

Source : Tax Foundation

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