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Dear Readers,
As from 2035, it will only be possible to register cars in the EU that do not emit CO2. This is tantamount to a ban on the sale of combustion engines since only pure electric motors meet this requirement.
The Greens and Environmental Action Germany are hailing the move as an overdue step that will finally bring planning certainty. For traditional manufacturing countries such as Germany, France and Italy, however, it is like setting a match to industrial policy.
For decades, entire economies have depended to a high degree on the production of diesel and petrol engines. Are we now simply going to throw away the chance to innovate this technology and make it sustainable, thereby helping to achieve the unerring reduction in greenhouse gases that is so urgently needed?
A look at other unresolved issues tells us why the EU’s decision, in addition to costing jobs, could also result in a far greater danger to the European economy.
In the upcoming negotiations in Brussels, many countries will realise that they do not even have the necessary infrastructure for e-mobility. BMW boss Oliver Zipse recently asserted that it will not be possible to produce the amount of renewable energy needed - at least not in Europe. He is right. Where will the raw materials come from for the millions of batteries that will be required? And something else gives pause for thought: Will e-cars really be allowed to run on dirty electricity from coal?
The industry is willing to change without a fight, be it Mercedes, Audi, VW, Opel, Fiat or Renault. It has no choice because the CO2 reductions are progressive and soon Euro 7, probably the strictest emissions standard of all time, will come into force. However, that is precisely the reason why it would have been more sensible, and in line with ordoliberal principles, to refrain from burning down an entire, highly innovative industry so irrevocably. The few exceptions made for e-fuels, which are technically possible but not yet available, will in no way be enough to give hope to the many specialised suppliers and build a bridge to climate-neutral mobility.
We also keep our finger on the pulse in other key areas of EU policy. This July Newsletter deals with rare diseases, the minimum wage directive, gender quotas and sustainability reporting, among other topics.
I wish you a stimulating read.
Stay tuned!
Best wishes
Dr. Jörg Köpke
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From 2035 onwards, it will not be able anymore to register cars with internal combustion engines.
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Latest EU Proposals in Focus
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Innovation: European Innovation Agenda
On 5 July, the Commission will present its Communication on the European Innovation Agenda. The Innovation Agenda has five goals: Firstly, it aims to improve access to finance for European companies to facilitate their expansion. Secondly, regulation is to become more innovation-friendly, for example through more experimentation clauses. Thirdly, research and development networks will be strengthened and better connected. Fourthly, it aims to bridge the innovation gap between EU regions. Lastly, entrepreneurial talent will be promoted and utilised more effectively.
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Czech Presidency: Focus on Rare Diseases
The Czech Republic took over the EU Council Presidency on 1 July. In terms of health policy, the political programme is focussed on reviewing the regulations on rare diseases. Rare diseases affect relatively few people and are often associated with chronic or life-threatening conditions. There are 6 to 8 thousand rare diseases and around 30 million people in Europe suffer from one of these diseases. Improvements are needed especially with regard to drug development and screening. The latter is completely absent in some member States, but the earlier rare diseases are detected, the greater the chances of treatment and cure. Promoting the development and production of drugs to combat rare diseases is likely to be a key component of the revision. Other health policy topics that will play a special role during the six-month Council Presidency are the pharmaceutical strategy (see cepPolicyBrief), including a reform of the general law on medicinal products, and dealing with the issue of "mental health".
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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 agreements since the last Newsletter.
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Trilogue Agreement on the Minimum Wage Directive
On 7 June, a provisional political agreement was reached on the Directive on adequate minimum wages in the EU (see cepInput 13/2020). Accordingly, member States with a statutory minimum wage must provide procedures for adjusting the minimum wage according to clear criteria. An adjustment must be made at least every two years (every four years if the minimum wage is automatically adjusted for inflation). The social partners must be involved in the process. In addition, member States are to strengthen the capacity of the social partners to conduct collective bargaining in order to ensure greater collective agreement coverage. In particular, member States must adopt an action plan to promote collective bargaining where collective agreement coverage is below 80%.
Trilogue Agreement regarding the Directive on Gender Balance on Corporate Boards
On 7 June, a provisional political agreement was reached on the Directive to ensure a more balanced representation of women and men among non-executive directors/supervisory board members of listed companies. The Commission had already submitted a proposal on this in 2012 [COM(2012) 614, see cepPolicyBrief 51/2012]. It stated that at least 40 % of supervisory board positions in listed companies should go to the under-represented gender. Companies that do not meet this target must report on why this is the case and how they are taking remedial action. In such companies, positions must also be filled by the respective under-represented gender where a woman and a man are equally qualified. Failure to comply with these obligations must be met with effective, proportionate and dissuasive sanctions.
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Trilogue Agreement on the Regulation on Third Country Subsidies
On 30 June, a provisional political agreement was reached on the regulation on third country subsidies (see cepPolicyBrief 3/2022). The regulation gives the EU the possibility to act against distortions of competition by third-country subsidised companies when they operate in the EU. Especially by acquiring European companies or participating in public tenders. Thus, the EU Commission can order compensatory measures, e.g. repayment of the subsidy, to eliminate the distortion of competition. So far, the EU can only act against third-country subsidised companies if they import goods into the EU. In these cases, the EU imposes duties on the subsidised goods imports.
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Trilogue Agreement on the Directive on Corporate Sustainability Reporting
On 21 June, a provisional agreement was reached on the Corporate Sustainability Reporting Directive [(CSRD), see cepPolicyBrief 21/2022].
The CSRD replaces the Non-Financial Reporting Directive which has been in place since 2018 (2014/95/EU). It obliges a wide range of companies to include, in their management reports, information on environmental, social and labour issues, on respecting human rights and on combating bribery and corruption. Whereas, until now, only capital market-oriented companies, banks and insurance companies with more than 500 employees were affected, the reporting obligations will in the future apply to companies with more than 250 employees and a turnover in excess of 40 million euros, irrespective of their capital market orientation. In addition to extending the scope of the provisions, the level of detail contained in the reports will also increase significantly. Thus, companies will, in the future, report more concretely on the impact of their activities on sustainability matters ("inside-out perspective") as well as the influence of sustainability matters on their business development, operating results and company position ("outside-in perspective"). Reporting should also be carried out according to uniform EU reporting standards. These are currently already being developed by the European Financial Reporting Advisory Group (EFRAG) and will subsequently be adopted by the EU Commission. The new information requirements will apply from 1 January 2024 to companies already subject to the current Non-Financial Reporting Directive. A grace period will still apply to all other companies now falling within the scope of the Directive for the first time. They do not have to report until 1 January 2025. A special rule applies to listed SMEs, small and non-complex credit institutions and captive insurance companies. For these companies, the reporting obligations will only apply from 1 January 2026. Certain SMEs are also to be given the option of not having to report until 2028 (opt-out rule).
Trilogue Agreement on the Regulation on Disclosures for Transfers of Crypto-Values
On 29 June, a provisional agreement was reached on the regulation on the transmission of information on transfers of funds and transfers of certain crypto assets. The EU Commission submitted a proposal [COM(2021) 422] on this topic in December 2021.
For years, payment service providers have been obliged to exchange information on the payer and the beneficiary of the money transfer in the case of traditional money transfers and to keep this information available for the competent supervisory authorities [Regulation (EU) 2015/847, see cepPolicyBrief 17/2013]. The regulation serves the traceability of money transfers and thus in particular the fight against money laundering and terrorist financing.
According to the agreement now reached, the regulation will not only apply to money transfers but also to the transfer of crypto assets (e.g. cryptocurrencies) and thus increase transparency in their exchange. The agreement includes that, when crypto assets are transferred, all information on the originator and the beneficiary must be transmitted between crypto asset service providers (CASPs) regardless of the amount of crypto assets transferred. The Council and the EP have thus not followed the proposals of the Commission, which had still provided for minimum thresholds. The providers of crypto services will be obliged to keep the information on principals or beneficiaries available for the supervisory authorities and, if necessary, to pass it on to them. There are to be special rules if crypto assets are exchanged between a crypto service provider and so-called "unhosted wallets", i.e. crypto wallets that are managed by private users themselves. A threshold of 1000 euros is envisaged here. Transfers of crypto assets remain exempt from the regulation if no crypto service providers are involved in these transfers (e.g. Bitcoin trading venues).
The new regulation must now be formally confirmed by the European Parliament and the Council. It will then apply simultaneously with the regulation on markets for crypto assets (see below) within 18 months and thus probably at the end of 2023.
Trilogue agreement on the Markets in Crypto Assets Regulation
On 30 June, a provisional agreement was reached on the Markets in Crypto Assets (MiCA) Regulation. The EU Commission had already submitted proposals on this topic in September 2020 [COM(2020) 593, see cepPolicyBrief 1/2021 and cepPolicyBrief 3/2021]. With the MiCA Regulation, a legal framework for the regulation of crypto assets will be created for the first time in the EU. Cryptocurrencies include classic cryptocurrencies such as Bitcoin, so-called stablecoins and utility tokens. Non-fungible tokens (NFTs) – digital assets that refer for example to art objects – are initially excluded. The aim of the MiCA regulation is to ensure consumer protection and financial stability, while at the same time enabling innovation in the various crypto sectors. The regulation focuses in particular on the regulation of the issuers of crypto assets, the trading venues where transactions with crypto assets take place, and the virtual wallets used to hold crypto assets. The effects of cryptocurrencies such as Bitcoin on the environment and climate were discussed particularly controversially until the end. More detailed information on this is now to be obtained from the market players. The Commission is then to present a report in two years at the latest and, if necessary, set minimum sustainability standards. Following the recent turbulence on the markets for stablecoins, the EP and the Council have also decided on stricter requirements to protect consumers as holders of these supposedly stable cryptocurrencies. For example, issuers of stablecoins must maintain a sufficiently liquid reserve at a ratio of 1:1 to enable holders to redeem even in the event of a crisis. In future, the issuers of stablecoins will be supervised by the European Banking Authority (EBA) and they must have a registered office in the EU. For monetary policy reasons, the use of stablecoins backed by non-European currencies and widely used as a means of payment will also be restricted in the EU. The agreement must now be formally confirmed by the European Parliament and the Council before the regulation can enter into force.
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Trilogue Agreement on the Critical Entities Resilience Directive
On 28 June, a provisional agreement was reached on the Critical Entities Resilience (CER) Directive. The EU Commission submitted a proposal on this in December 2020 [COM(2020) 829].
The new CER Directive is intended to replace the Directive on the identification and designation of European Critical Infrastructures (ECI Directive 2008/114/EC), which has been in force since 2008, especially against the background of the growing importance of the digital economy, new challenges due to climate change and the Covid 19 pandemic. The new directive covers many critical facilities, including those in the energy, transport, health and drinking water sectors, as well as central public administrations, if they provide services that are essential to society. It requires more critical facilities than before to develop strategies to better prepare for service disruptions due to natural disasters, terrorist attacks or health emergencies. Institutions will be required to increase their preparation for and protection against these threats and to take steps to respond to them. Member states will also be required to develop national strategies to strengthen the resilience of critical facilities and they will have to carry out a new risk assessment every four years. In addition, a mechanism has been created to identify critical facilities that are of particular European importance. According to this, they provide their critical services in at least six member states.
The new CER Directive still needs to be formally approved by the European Parliament and Council before it can enter into force. It is closely linked to two other EU legislative acts aimed at strengthening the cyber security of critical infrastructures, namely the new Network and Information Security Directive (NIS 2 Directive, see cepPolicyBrief 13/2021) and the Digital Operational Resilience Act (DORA, see cepPolicyBrief 11/2021).
Trilogue Agreement on the e-Evidence Package
On 28 June, a preliminary provisional political agreement was reached on the Regulation on European Surrender and Preservation Orders for Electronic Evidence in Criminal Matters and the Directive on the Establishment of Uniform Rules on the Appointment of Representatives for the Purposes of Gathering Evidence in Criminal Proceedings (e-Evidence Package). The EU Commission already submitted proposals on this topic in 2018 [Regulation COM(2018) 225 / Directive COM(2018) 226].
After four years of negotiations the provisional agreement is intended to make it easier for investigators to obtain access to cross-border electronic evidence for criminal prosecution. For example, law enforcement authorities will have easier access to e-mails and chat messages in other EU countries. They will be able to demand that service providers hand over electronic evidence. In addition, they will be able to demand the retention of data.
The e-Evidence package still has to be formally confirmed by the European Parliament and the Council before it can enter into force. Since some aspects could not be fully clarified in the preliminary trilogue agreement, this is likely to take some time.
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Trilogue Agreement on Regulation on Cross-border Health Threats
On 23 June, a political agreement was reached on the regulation on serious cross-border health threats (see cepPolicyBrief 19/2021). The EU wants to be able to respond better to EU-wide health crises in the future. This is to be ensured above all through the development of coherent emergency plans – both at the EU level and at the level of the member states. In addition, the so-called Health Security Committee is to function as a central hub for coordination. The Commission is to be authorised to declare an EU-wide health emergency. This will enable it, among other things, to activate mechanisms to monitor drug shortages or special support from the European Centre for Disease Prevention and Control (ECDC). There is also the possibility for the Commission to procure medical supplies, such as vaccines, antibiotics or protective equipment, together with the member states. Following the agreement, the EU Parliament and Council still need to formally approve.
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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:
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Food Waste: Legally Binding Targets to Follow
As announced in the "Farm to Fork" strategy (see cepPolicyBrief), the Commission intends to adopt legally binding targets to reduce food waste. With up to 20% of all food produced in the EU being thrown away – some 88 million tonnes annually – the Commission sees a need for action. Particularly since the existing obligations of the member states to reduce food waste, for example under the revised Waste Framework Directive [2008/98/EC], have not been sufficient. The Commission's proposal for a new Directive will therefore set precise targets for the reduction of food waste along the entire food chain. In addition, member states are to provide improved information on food waste and promote more sustainable production processes.
The submission period for opinions ends on 16 August 2022.
Go to Consultation
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Council Recommendation on Smoke-free Environments: List of Spaces Covered will be Extended
The Commission intends to update the 2009 Council Recommendation on smoke-free environments [2009/C 296/02] in light of new market conditions for tobacco products. In addition to traditional products, e-cigarettes and heated tobacco products are also available. There is still a lack of reliable evidence regarding the long-term effects of these newly developed products on human health. In line with Europe’s Beating Cancer Plan, however, the Commission now wants to further reduce tobacco consumption and, above all, protect non-smokers from passive smoking. As the existing Recommendation only defines some indoor spaces as smoke-free environments, and since tobacco smoke or aerosols from the new products can also be problematic in outdoor spaces, the scope of the Recommendation will be extended to include additional spaces such as schools and playgrounds.
The submission period for opinions ends on 20 July 2022.
Go to Consultation
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4 - 7 July 2022
Strasbourg
Session of the European Parliament. This will concern, among other things, the need for common European action on care.
11 July 2022
Brussels
Meeting of the Eurogroup. *
12 July 2022
Brussels
Meeting of the Economic and Financial Affairs Council (Ecofin). This will concern, among other things, the adoption of the euro by Croatia and the implementation of the Recovery and Resilience Facility.
*The precise agenda was not yet available at the time of going to press.
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cep Publications to Current Topics
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cepInput: How green hydrogen will make Europe more dependent
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Surging energy prices as a result of the Ukraine war are vehemently urging the European Union to turn away from fossil fuels. Brussels therefore sees potential in green hydrogen. The Centrum für Europäische Politik (cep) considers this energy carrier to be an important, albeit limited, element on the path towards a decarbonized European economy.
Got to cepInput
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cepPolicyBrief: Fit for 55: Climate and Road Transport
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The EU wants to reduce net greenhouse gas emissions to zero by 2050 and by 55 per cent by 2030 compared to 1990. To this end, the European Commission has proposed an extensive set of measures ("Fit for 55"). The Centrum für Europäische Politik (cep) welcomes the highly controversial Emissions Trading System for Road Traffic and Buildings (EU EHS II) but calls for social cushioning of exploding energy prices.
Go to cepPolicyBrief
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Dear Readers,
German Emperor Wilhelm II once said "I believe in the horse. The automobile is a temporary phenomenon." Was the Kaiser right after all?
Sincerely,
Dr. Jörg Köpke
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