Dear Readers,

When events and developments outpace the ability of politicians to react, the need for action becomes ever greater. The result: politics is continually playing catch-up and gradually losing control. This is exactly what has happened in the EU, and in many areas all at once: Ukraine is waiting for supplies, while the EU after two years has still not managed to produce enough ammunition. In the US, Donald Trump is preparing to return to the White House, while the EU, with four years to increase its geo-economic resilience, has failed to conclude trade agreements. Artificial intelligence made a quantum leap in 2023, while the EU has brought about comprehensive regulation of the risks, but no strategy to make the EU a leading AI power.

Those who fail to think far enough ahead or to act quickly enough remain trapped in the present. In other words: only those who think far enough ahead will have the courage to make major changes. Game theory has already shown us that players who are  patient and prioritise future payouts over instant rewards, gain a strategic advantage over the impatient players. The EU's lack of strategic capability has clearly resulted in a loss of sovereignty and there is little that can be done about this in the short term. The EU needs to up its tempo, which it can do by setting clear priorities and finally putting an end to its laborious micromanagement.  

Yours
Henning Vöpel

Defence Policy: Strengthening the European Defence Industry

Today, the Commission is presenting its European Defence Industrial Strategy and a Regulation on the European Defence Investment Programme. The two initiatives were originally due to be presented on 27 February. With these two initiatives, the Commission is aiming to strengthen the European defence industry and enable Member States to acquire new defence equipment. The Regulation, which has also been referred to as the Defence Production Act, is intended to promote joint development and procurement projects that are of great common interest to the security of the Member States. It will also enable companies to deliver defence equipment quickly when needed.

Climate Change: Coping with Climate Risks

On 12 March, the Commission will publish an EU-wide climate risk assessment. Climate change results from greenhouse gas (GHG) emissions, which have a delayed effect. Even if all GHG emissions were to stop immediately, the negative effects of climate change would no longer be completely avoidable. Based on the EU Adaptation Strategy 2021[COM(2021) 82, see cepPolicyBrief 16/2021], the EU Climate Risk Assessment will support Member States when it comes to making informed decisions on the risks and trade-offs of mitigating climate impacts.

Biotechnologies: Initiative to Strengthen the EU as a Business Location

On 20 March 2024, the Commission will present an initiative to promote biotechnologies and bio-based industrial production in the EU. Biotechnologies are of great strategic importance for the objectives of the EU Green Deal and for maintaining the global competitiveness of European industry. As part of the initiative, the Commission would like to propose a catalogue of measures to strengthen Europe's innovative power in this area and improve the conditions for business. In addition to increased funding for research and development, this will probably also include instruments aimed at removing obstacles to the commercialisation and market ramp-up of innovative products. These include a lack of venture capital, an increasing shortage of qualified labour and high regulatory complexity (see cepInput 5/2024).

The Commission, the Council and the European Parliament regularly negotiate in the so-called trilogue on EU legislative proposals in order to find a common position. We have put together a summary of the most important trilogue decisions since the last Newsletter.

Trilogue Agreement on the Reform of the Stability and Growth Pact

On 1 February 2024, a provisional political agreement was reached on reform of the Stability and Growth Pact. The agreement largely corresponds to the Council's position [see cepAdhoc 8/2023]. It stipulates that the deficit and debt limits, of 3 per cent of gross domestic product (GDP) and 60 per cent of GDP respectively, continue to apply. In future, however, instead of fixed rules on debt reduction, a four-year debt reduction path will be negotiated between the Member States and the EU Commission. The debt reduction path must be designed in such a way that Member States with a debt level of over 90 per cent of GDP reduce their debt level by at least one percentage point per year. For Member States with a debt level of between 90 and 60 per cent of GDP, an annual reduction of at least 0.5 percentage points is sufficient. Compliance with the debt reduction path is to be monitored solely based on the change in the net expenditure of the Member States as this amount can easily be controlled by the Member States. The trilogue agreement now means that co-financing contributions by Member States to EU programmes are not taken into account in the change in net expenditure which enables the Member States to increase expenditure.
Finally, it was decided that deviations from the agreed net expenditure can trigger a deficit procedure if all three of the following conditions are met: Firstly, the Member State's debt level exceeds 60 per cent of GDP. Secondly, the Member State’s overall deficit is not close to balance. And thirdly, the deviation from the agreed increase in net expenditure exceeds either 0.3 percentage points of GDP annually or 0.6 percentage points of GDP cumulatively. It is also still possible to initiate a deficit procedure if the Member State's deficit exceeds 3 per cent of GDP.

Trilogue Agreement on the Single Market Emergency Instrument

On 1 February 2024, a provisional political agreement regarding the Regulation on the single market emergency instrument (cepPolicyBrief 6/2023) was reached. The Regulation has now been renamed as the Internal Market Emergency and Resilience Act (IMERA). The Regulation is intended to coordinate the actions of the Member States in the event of an EU-wide crisis. For example, border closures, such as those that occurred during the Covid-19 pandemic, are to be avoided. In addition, continuous monitoring will ensure that future threats are recognised at an early stage. If a threat is detected, either a monitoring or an emergency mode can be triggered, depending on the severity of the threat. This will facilitate a coordinated response by the Member States.
 
Vote on Supply Chain Directive Failed

The vote in the Council on the final adoption of the Corporate Sustainability Due Diligence Directive (CSDDD, cepPolicyBrief 16/2022) has failed. The Council and Parliament had actually already reached an informal agreement on 14 December 2023. The fact that this informal agreement did not receive a majority in the formal vote in the Council is very unusual and is due to the fact that large Member States in particular, such as Italy, France and Germany, abstained from voting. These Member States fear a bureaucratic overload for companies. The Belgian Council Presidency is now trying to persuade one of these Member States to vote in favour. If this is successful, a new vote will be scheduled in the Council. However, it is uncertain whether and when this will succeed. The future of the Supply Chain Directive is therefore once again open.

Trilogue Agreement on the Mercury Regulation

On 8 February 2024, a provisional political agreement was reached on amendments to the Mercury Regulation [(EU) 2017/852]. In future, the uses of mercury that are still permitted will be further regulated and gradually phased out. From 2025, the use of dental amalgam for dental treatment will be banned for almost everyone. In the case of low-income individuals, who would otherwise be disproportionately affected, exemptions will apply for a further 18 months. By 2029, the Commission will also publish guidelines on how to reduce the release of mercury by crematoria. In addition, a ban on the manufacture, import and export of mercury-containing lamps will gradually be brought in.

Trilogue Agreement on the Air Quality Directive

On 20 February 2024, a provisional political agreement was reached on a revision of the Air Quality Directive [see cepPolicyBrief 11/2023]. From 2030, stricter limit and target values will apply to several pollutants such as particulate matter (PM2.5, PM10), nitrogen dioxide and sulphur dioxide. These are based on the World Health Organisation's (WHO) strictest interim targets for 2021. Deviations will be permitted up until 2040 if the limit values cannot be achieved due to the heating systems predominantly in use - such as coal-fired heating systems in Poland - or due to climatic and geographical characteristics - such as those of the Po Valley in northern Italy. There is now a right to compensation for damage to health due to a violation of the national provisions to transpose the Directive.

Euro Clearing: Agreement on Revision of EU Rules on Derivatives

On 7 January 2024, the Council and the European Parliament reached a provisional agreement, firstly, for a Regulation on measures to mitigate excessive risk exposures to central counterparties in third countries and to increase the efficiency of EU clearing markets. And, secondly, for a Directive to address the concentration risk vis-à-vis central counterparties and the default risk in centrally cleared derivatives transactions. The Commission presented the two proposals back in December 2022 [COM(2022) 697 and COM(2022) 698, see cepStudy, cepDossier and a Standpoint in the Frankfurter Allgemeine Zeitung (FAZ)].
The European Market Infrastructure Regulation [EMIR, (EU) No. 648/2012 has been in force since 2012. Under the Regulation, certain over-the-counter (OTC) derivative contracts must be cleared through central counterparties (CCPs). However, the clearing of derivative contracts is heavily concentrated in just a few CCPs in third countries, in particular the United Kingdom (UK), which results in ongoing risks to financial stability in the EU. These risks are now to be countered. As part of the agreement, the negotiators decided that certain counterparties to a derivatives transaction must in future have an active account with a CCP in the EU. The counterparties will be able to settle transactions via this account at short notice and must also ensure that it is actually utilised. It must therefore be both "functional" and "actively" used. In order to increase the attractiveness of the EU as a location for clearing activities, the procedures for the authorisation of these activities are also to be streamlined. Cooperation between national supervisory authorities and the European Securities and Markets Authority (ESMA) will also be improved. The latter will also be given additional powers as a coordinator in crisis situations. The ultimate responsibility will, however, remain with the competent national authorities.
 
CSRD: Delayed Submission of Sector-specific Sustainability Reporting Standards

On 7 February 2024, the Council and the European Parliament reached a provisional agreement on an amendment to the Accounting Directive pertaining to sustainability reporting [see cepPolicyBrief 21/2021 and cepAdhoc 2/2023]. The Commission presented a proposal on this in October 2023 [COM(2023) 596].
The new Directive (EU) 2022/2464 on corporate sustainability reporting (Corporate Sustainability Reporting Directive, CSRD) has now been in force since 5 January 2023. Under the Directive, from 2024, numerous companies will gradually have to fulfil extensive sustainability-related reporting obligations. At the end of July 2023, the Commission also adopted cross-sectoral reporting standards for this purpose, under a delegated act. Thus, the CSRD then additionally required the Commission to publish sector-specific standards, standards for small and medium-sized enterprises (SMEs) and standards for certain companies from third countries by the end of June 2024. The targeted amendment to the Directive will now give the Commission two more years, so it will not now have to submit these standards until the end of June 2026. It will, however, present a total of eight sector-specific standards before the new deadline at the end of June 2026, i.e. as soon as it has finished drafting them. The postponement comes against the backdrop of the EU Commission's announcement that it intends to reduce bureaucratic burdens by 25%.

Trilogue Agreement on Production Capacities for Zero-emission Technologies

On 6 February 2024, a provisional political agreement was reached on the Regulation to strengthen European manufacturing capacities for zero-emission technologies ("Net-Zero Industry Act"). The aim is to support the development of production facilities for goods such as electric motors, wind turbines and photovoltaic modules in the EU. To this end, the Regulation stipulates maximum time limits for the official permit procedures for installations. These are 12 months for projects with a capacity of less than 1 gigawatt and 18 months for larger projects. Projects that make a particular contribution to decarbonisation can be designated strategic projects, which further shortens the permit periods. The agreement also provides for new rules on public procurement procedures relating to zero-emission technologies. These provide that the expected contributions to sustainability and (in the case of heavy dependence on imports from individual third countries) to the resilience of the EU must be included as additional criteria in the award decision.

The EU Commission asks decision-makers and interested parties from civil society for their opinion on European policy proposals. Here is our short-list of the most important consultations:

Virtual Worlds and Generative AI: Possible Competition Problems

The Commission wants to use a public consultation to identify potential competition problems that may arise in new markets around virtual worlds such as the metaverse (1) and generative AI (2). With regard to virtual worlds (1), the Commission asks, among other things, about barriers to market entry, barriers to growth, competitive factors, players, market power and data monetisation models; with regard to generative AI systems (2), it asks, among other things, about the main barriers and competitive factors for the provision, distribution and integration of generative AI, as well as about monetisation opportunities, data and interoperability.

The submission period for opinions ends on 11 March 2024.
Go to Consultation

Package Travel

The Commission has launched a Consultation on the proposal to amend the Package Travel Directive. The Commission's proposal should be seen primarily in the context of the experiences of 2020. After tourism in the EU came to a virtual standstill as a result of travel and other restrictions, tourism companies in particular were confronted with acute liquidity shortages. The ability to issue vouchers instead of refunding the travel price was supposed to be a means of cushioning the impact of the COVID-19 pandemic. The Commission proposal now stipulates that advance payments may not exceed 25% of the travel price and that tour operators may issue vouchers, but consumers do not have to accept them. The voucher must also be transferable and covered by insolvency protection.
 
The submission period for opinions ends on 13 March 2024.
Go to Consultation

Bisphenol A (BPA) in Food Contact Materials

The Commission has launched a Consultation on the planned ban on bisphenol A (BPA) and other bisphenols in materials that come into contact with food, so-called food contact materials. These include, for example, plastic boxes and protective coatings for cans. The planned ban follows an opinion by the European Food Safety Authority, which came to the conclusion that the current exposure poses a health risk to consumers.
 
The submission period for opinions ends on 8 March 2024.
Go to Consultation

Greening Corporate Fleets

The Commission is considering proposing EU requirements for an accelerated conversion of corporate fleets to zero-emission vehicles. In 2025, it therefore intends to publish a Communication on "Greening corporate fleets". The Consultation aims to enable all stakeholders - such as car rental companies, mobility service providers, logistics companies and their customers, business and environmental organisations and public authorities - to draw the Commission's attention to the potential impact of all the options it is considering.

The submission period for opinions ends on 30 April 2024.
Go to Consultation

Digital Networks Act: Initial Ideas for Regulating the Connectivity Sector

On 21 February 2024, the EU Commission published a White Paper on the future of the connectivity sector and connectivity infrastructure. It contains a number of ideas for a Digital Networks Act (DNA), which the Commission will probably present in the next legislative period. The White Paper contains some interesting regulatory approaches. For example, the Commission is considering subjecting cloud providers to regulations similar to those already in place for telecommunications network operators (TC network operators). The Commission is also in favour of reducing access regulation for telecommunications network operators with significant market power. As in previous years, the Commission is also proposing harmonisation of the rules on the use of radio frequencies. It also wants to accelerate the transition from old copper network infrastructure to advanced fibre optic network infrastructure, and improve the protection of submarine cable infrastructure. The Commission is also considering extending the objectives of the regulatory framework for the connectivity sector. In future, sustainability aspects, the competitiveness of the industry and economic security will also be taken into account.
 
More details on the Commission's ideas can be found in a cepDossier.
 
The Commission now wants to obtain feedback from stakeholders on the ideas presented in the White Paper as part of a consultation.

The submission period for opinions ends on 30 June 2024.
Go to Consultation

7 March 2024
Luxembourg
The CJEU will deliver its judgement in case C-604/22 on important data protection issues in connection with the Transparency and Consent Framework (TCF) developed by the Interactive Advertising Bureau (IAB) Europe. The TCF is an industry standard for online marketing that is widely used for real-time bidding in the context of the instant and automated online auctioning of user profiles for the sale of advertising space on the Internet. It is intended to facilitate compliance with the General Data Protection Regulation as regards online marketing and advertising activities. The TCF enables so-called Consent Management Platforms to store the consents, objections and preferences of internet users for advertising purposes in a coded string of numeric characters, or so-called "TC String", and to pass them on to participants in the online advertising market. This information is then used by the advertising companies to display adverts that are specifically tailored to the user's profile. The case is firstly primarily concerned with the extent to which, and for whom, a TC String represents personal data. Website operators that implement the TCF standard and industry organisations such as the IAB - who may not even have access to the data which their members process - are possible candidates. Secondly, the case deals with the question of whether and to what extent a standard-setting industry organisation such as IAB Europe can be considered as a "controller" or "joint controller" within the meaning of the GDPR. The ECJ's answers are not only a fundamental prerequisite for assessing the admissibility of the use of the TCF standard under data protection law, but are also generally likely to provide further information regarding the definition of "personal data" and "(joint) controllers".
 
11-12 March 2024
Brussels
Meeting of the Employment, Social Policy, Health and Consumer Affairs Council
 
11-14 March 2024
Strasbourg
Session of the European Parliament. Topics include the Cyber Resilience Act (see cepPolicyBrief 1/2023), the Product Liability Directive (see cepPolicyBrief 2/2023) and the AI Act (see cepPolicyBrief 27/2021)

cepPublications

The cepDossier aims to draw attention to important EU legislative proposals in a more concise form than a Study or PolicyBrief. Current proposals are reported and briefly summarised. The aim is to achieve even faster delivery of interest-driven information, which may be of relevance to sectors and stakeholders.

"It is not that we have a short time to live, but that we waste so much of it." said Seneca. Time is what we make of it.

Yours
Henning Vöpel