Alternatives to Russian gas + Product li • Table.Briefings

Dear reader,

Decision day: Today, the European Commission plans to present its delegated act to supplement the taxonomy and, in it, classify nuclear energy and natural gas as sustainable transitional solutions under certain conditions. It remains to be seen whether the authority will rework its controversial draft. However, Finance Commissioner Mairead McGuinness had ruled out fundamental changes. Nevertheless, four EU countries insisted on further improvements shortly before the final decision: In a joint letter to the Commission, Austria, Denmark, Sweden, and the Netherlands demanded on Tuesday that natural gas should not be classified as “green”.

Around five months after its completion, the Nord Stream 2 Baltic gas pipeline is still not in operation. The German Federal Network Agency had suspended certification of the billion-euro project until the operating company implements the EU requirements for unbundling network operations and natural gas trading. Nord Stream 2 AG formally fulfilled the requirement last week by establishing a German subsidiary. Nevertheless, further checks are necessary, the BNetzA said.

At the same time, it is becoming increasingly doubtful whether the pipeline, which is supposed to transport Russian gas across the Baltic Sea to Germany, will ever become operational. After all, the infrastructure project is part of possible sanctions imposed by the West against Russia in the Ukraine conflict. During a visit to Kiev yesterday, EU Commission Vice President Valdis Dombrovskis assured Ukraine of support. He said the EU’s review of an operating permit for Nord Stream 2 was on hold and that Brussels would do everything it could to prevent the Kremlin from using the supply of natural gas “as a weapon”.

Nevertheless, a possible total loss of Russian gas supplies in Europe is perceived as a serious threat. The worst-case scenario once again highlights the EU’s energy import dependency. While the Commission is trying to find alternatives, discussions are also starting in Germany: Should we become more independent of Russian gas? The problem: The alternatives are scarce – and have major drawbacks. We asked politicians, industry, and academia.

Does the over 30-year-old Product Liability Directive from 1985 still offer sufficient legal certainty and consumer protection in the age of intelligent and AI-based products and services? Opinions differ on this. While consumer representatives favor revising the legislation, industry rejects the EU Commission’s move. In order to close possible regulatory gaps, the European Commission apparently even wants to adopt a two-pronged approach. The existing product liability directive is to be revised. In addition, a new liability framework for artificial intelligence is being discussed. Eugenie Ankowitsch has analyzed which aspects are particularly controversial.

Your
Timo Landenberger

Gas imports: expensive road to independence

Above all, natural gas had to be cheap and not too harmful to the climate. The argument of supply security has not carried too much weight so far – at least not in Germany. After all, Russia, by far the most important gas supplier, has always been reliable, so the common argument goes – even during the height of the Cold War.

However, the threat of a hot war in Ukraine has prompted a rethink. The EU Commission is currently trying to find alternatives to Gazprom and Co, also at the urging of the USA. In Brussels and in Washington, the danger that Moscow could respond to Western sanctions by cutting back or even stopping gas supplies to Europe is being taken seriously. On Friday, US President Joe Biden and Commission President Ursula von der Leyen had declared that they would work together to ensure a “continuous, sufficient and timely supply of natural gas to the EU”.

However, the Commission does not have a mandate from the member states to negotiate with potential energy suppliers. But that is not necessary for diplomatic initiatives in an area that is important for the entire EU, explained Commission spokesman Eric Mamer in Brussels. The Commission has been discussing ways to diversify energy supplies with international partners for some time.

Brussels is therefore in contact with Norway and Qatar. This Friday, Energy Commissioner Kadri Simson will also travel to Azerbaijan, and on Monday, she and EU Foreign Affairs Commissioner Josep Borrell will attend the EU-US Energy Council in Washington. But a meeting Simson had with Qatar’s energy minister on Tuesday yielded little progress: The amount of gas needed by the EU cannot be unilaterally replaced by anyone without affecting supplies to other regions in the world, Saad Sherida Al-Kaabi said. “Europe’s energy security requires a joint effort by many parties.”

Accelerated departure from Russian gas?

But what is currently still a precautionary measure for emergencies could usher in an accelerated departure from Russian gas. Europe wants to reduce its dependence on fossil fuels in the long term anyway via the Green Deal. “Given the tensions in the relationship with Russia, the question arises as to whether we should accelerate this process significantly and also be prepared to accept higher energy costs in return,” the foreign policy spokesman of the SPD parliamentary group, Nils Schmid, told Europe.Table. The discussion must now also be held within the German government.

Many agree on the goal: “We should get to the point where Russia can no longer use its energy supplies as leverage against us,” says Schmid. So far, according to the EU Commission, the EU imports around 40 percent of its gas from Russia; in Germany, the share is even higher. A supply freeze would therefore be difficult to offset, but deliberate public communication with potential additional energy partners alone makes geopolitical sense, says Austrian MEP Andreas Schieder (S&D). “If clear alternatives are pointed out to Russia in this context, then that is also a logical consequence of Russia’s deliberate provocation policy.”

Plans for LNG terminals in Germany

However, opinions differ on how the goal can actually be achieved. SPD politician Schmid points to the German government’s consideration of creating a strategic gas reserve. After all, Germany’s gas storage facilities are unusually empty; according to data from Gas Infrastructure Europe, the level was only just under 37 percent on January 30. To be better prepared in the future, Schmid does not rule out a government solution for the reserves.

The US government, in turn, is urging Europeans to rely more on liquefied natural gas from the United States or Qatar. 28 LNG terminals already exist in the EU, and new ones are being built: Greece, for example, recently announced plans to build a second terminal in Alexandroupolis. Meanwhile, German Chancellor Olaf Scholz also supports plans to build “one or more” LNG terminals in Germany, as government spokesman Steffen Hebestreit said on Monday.

Such plans have been around for some time but were not pursued vigorously in Germany. One reason: “It’s no secret that these terminals are pure door-openers for fracked gas from the US,” says CDU energy politician Markus Pieper. Green MEP Reinhard Bütikofer, therefore, warns that the EU is heading into an “alternative dead end”.

Bütikofer instead calls for an end to the Nord Stream 2 Baltic Sea pipeline: “As long as natural gas is part of our energy mix, we should push for Russia to remain dependent on Ukraine for gas exports to the EU.” This would create more security for Ukraine and prevent the “misinvestment in new fossil fuel infrastructure”.

High LNG prices threaten industry

Nina Scheer, energy policy spokeswoman for the SPD parliamentary group in the Bundestag, also points to the high cost of liquefied natural gas: “The question of further LNG volumes should not be answered without considering price effects.” Moreover, Russia has so far always met its supply obligations.

Natural gas is currently the most important energy source in the chemical industry and also an important raw material in production, said a spokesman for the German chemical industry association VCI. Ammonia production has already been curtailed at several sites due to the current high gas prices, and high gas prices have a negative impact on companies’ competitiveness, the VCI said. “More expensive LNG would exacerbate these effects.”

E.ON CEO Leonhard Birnbaum also points to the limited availability of liquefied natural gas. A large LNG tanker could transport about as much gas as Nord Stream 1 in one day. Nord Stream 2 is therefore difficult to replace, especially if Germany relies more on gas to replace coal-fired power plants. “Then we should not think about how to do it without Russian gas.”

Without Russian imports, energy supply would become “very difficult and, above all, very expensive,” says Christian Egenhofer, a researcher at the Centre for European Policy Studies (CEPS). That’s because it would then depend almost entirely on the global market order. “If the economy is booming in Asia, gas prices will rise, and Europe will have to top them to avoid losing supplies.”

High gas prices, in turn, would lead to more coal being burned to generate electricity. And energy-intensive industries that depend on the use of natural gas in their manufacturing processes would have to cut back or cease production.

Existing infrastructure is not sufficient

According to Jacopo Pepe, an energy expert at the German Institute for International and Security Affairs (Stiftung Wissenschaft und Politik), it is also questionable whether the required gas volumes could even be handled by existing LNG terminals and infrastructure. “We have about 110 billion cubic meters of spare capacity in the EU. If Russian supply were to stop altogether, we would still be about 30 to 40 billion cubic meters short.”

The Brussels-based think tank Bruegel comes to a similar conclusion. According to a study, Russian natural gas exports to the EU in 2021 would amount to 1,550 TWh via pipelines and around 120 TWh via LNG tankers. This means that around 1,700 TWh would need to be replaced if Russia were to stop its natural gas exports to Europe completely, but the existing terminals could only handle about 1,100 TWh of additional LNG imports to the EU, the document says.

In addition, the EU gas network would also face a challenge in the event of a corresponding conversion, the authors write. After all, this network is designed to bring imports from the east to the west to the consumers. However, according to energy expert Pepe, this is also technically feasible the other way around. “The liquefied gas is vaporized in the port terminals and fed into the gas network. If necessary, the direction of flow would have to be changed in some pipelines.” But that, too, is nothing new. After all, Germany is currently exporting Russian natural gas to Ukraine in the opposite direction to the usual one.

And environmental concerns about fracked gas production also need to be put into perspective: “With pipelines, you have leakage. With LNG, you have both emissions during transport and significant environmental damage during fracking,” Pepe says. In environmental terms, it’s figuratively speaking a choice between the devil and the deep blue sea.Till Hoppe, Timo Landenberger, Stephan Israel and Lukas Scheid

Product liability and AI: Commission working on new rules

By

Eugenie Ankowitsch

The Product Liability Directive applies to all moving products regardless of the technology they use, and therefore actually also to AI-controlled products. It is intended to provide protection at a level not covered by national fault-based liability alone. It establishes a system of strict liability for the manufacturer.

However, an evaluation commissioned by the EU Commission found that its outdated concepts and terminology made it difficult to apply the directive to products in the digital economy and the circular economy. It was also complicated for consumers to obtain compensation. Especially when proving that complex products were defective and caused the damage. Whether intangible items such as digital content, software, algorithms and data are covered by the directive, especially if they are provided separately from a tangible product, is also not clear.

Revision of the Product Liability Directive

In order to close the regulatory gaps identified in the report, the European Commission apparently wants to adopt a two-pronged approach. On the one hand, the existing product liability directive must be revised. In addition, a new liability framework for artificial intelligence is being discussed. A proposal for a corresponding directive could come in the 3rd quarter of 2022.

Consumer organizations and NGOs welcome the Commission’s initiative. For example, the European Consumers’ Organisation (Bureau Européen des Unions de Consommateurs, BEUC) recommends a comprehensive revision of the EU Product Liability Directive in its statement on the EU Commission’s consultation. From the consumer perspective, the directive is no longer up to the challenges of new technologies and leaves many questions unanswered.

Redefinition of key terms

For example, it is essential to review and update key terms such as “product”, “defect” and “damage”. BEUC also calls for the time when a product is placed on the market to no longer be the decisive time for assessing defectiveness.

Although the definition of “product” in the Product Liability Directive is broad, its scope could be further clarified, the Commission report on the impact of artificial intelligence, the Internet of Things, and robotics in terms of safety and liability also states. This would take better account of the complexity of new technologies.

Unsurprisingly, the industry is against a revision of the liability directive. “The existing legal framework has deliberately been designed to be open to technology. It has proven itself and works well. Even the changes brought about by the digital age do not make a revision necessary,” states a statement from the German Medical Technology Association (BVMed). Interfering with this system could lead to additional costs, especially for small and medium-sized companies. As a result, urgently needed investments could be postponed.

Reversal of the burden of proof: a no-go for the industry

A possible reversal of the burden of proof in favor of consumers is particularly controversial. AI applications are often integrated into complex IoT (Internet of Things) environments where many different networked devices and services interact. Due to the complexity of these technologies, it can be very difficult for victims to identify the liable party and prove all the requirements necessary under national law for a successful claim. The cost of doing so could be economically prohibitive and discourage victims from seeking compensation, the EU Commission report says.

For this reason, a reversal of the burden of proof or at least a lightening of the burden is now being discussed. This would primarily affect national regulations. According to the European Product Liability Directive, a product that does not comply with mandatory safety regulations is considered defective, regardless of the manufacturer’s fault.

The industry strictly rejects the reversal of the burden of proof. According to BVMed, there is already an appropriate distribution of the burden of proof under current European and national law, including the easing of the burden of proof. Rigid rules of evidence or even a general reversal of the burden of proof would run the risk of destroying the “carefully balanced risk relationship” between companies and consumers. In addition, it should be borne in mind that a reversal of the burden of proof would represent a major encroachment on national civil procedural law.

The European Consumers’ Association, on the other hand, is in favor. Currently, the hurdles for plaintiffs are too high. The digital context has even exacerbated the difficulties in providing evidence and increased the information asymmetries between plaintiffs and defendants, the consumer representatives’ statement says.

Taking intangible damage into account

The idea of extending the list of claims to include non-material (e.g., psychological) damage, loss of data, or environmental damage is also likely to provoke heated debate. For example, a manufacturer of AI-assisted humanoid robots could be required to take into account the non-material harm their products might cause to vulnerable users such as elderly people in need of care. Currently, each member state can decide for itself whether to compensate for non-material harm.

BVMed rejects this proposal. The General Data Protection Regulation already covers damages in connection with data protection violations or a loss of data. A claim for damages in relation to environmental damage should – insofar as this is deemed necessary – be regulated by special legislation in corresponding environmental laws. In addition, the association emphasizes that strict liability under the Product Liability Directive is subject to strict challenges and should only apply to particularly important legal assets.

A separate policy for AI

For high-risk AI systems, the Commission apparently wants to develop its own liability rules. Due to their specific characteristics, such as complexity, connectivity, autonomy, and opacity, and the associated “black box effect”, it could, in the Commission’s view, be difficult for injured parties to obtain compensation based on the Product Liability Directive or national rules on fault-based liability. This is because it is particularly difficult to prove the defectiveness of a product or fault and the causal connection with the damage in these systems.

Here, too, BVMed is opposed to a new legal framework. The feared complexity of learning systems should rather be addressed in transparent specifications for the development and documentation of the systems at the regulatory level. According to the BVMed statement, the responsible party is also liable for violations of these material requirements under the current system.

Careful coordination required

The consumer association BEUC also believes that many of the problems associated with digital and artificial intelligence could be solved by an ambitious revision of the Product Liability Directive. From consumers’ point of view, it does not matter into which category the AI system that caused the damage was classified.

The association also calls on the Commission to carefully align the various civil liability initiatives and EU legislation currently pending, including the Digital Services Act, the revision of the General Product Safety Directive, and the AI Regulation. All of these initiatives are closely intertwined in practice and need to be considered together.

EU states want to become more independent in raw materials

EU countries want to reduce dependence on other countries for critical raw materials. “We need to prepare for future supply chain disruptions,” said Commission Vice President Maroš Šefčovič after the informal Competitiveness Council in Lens, France. These were “not a question of if, but when“. Europe is currently heavily dependent on a small number of non-EU countries, which, moreover, often have lower environmental and social standards.

There was broad support among member states for entering into new raw material partnerships with countries such as Canada for diversification. Massive investment in research is also needed to reduce the demand for critical raw materials, for example, in battery production, said Agnes Pannier-Runacher, the French industry secretary. For lithium, for instance, record prices are already being seen, and a shortage is foreseeable, Šefčovič warned.

Germany and other member states also advocated for legal requirements for resource efficiency and the recycling of raw materials. “The Commission should present an ambitious legislative package to boost the circular economy for raw materials,” Franziska Brantner, Parliamentary State Secretary at the German Federal Ministry for Economic Affairs and Climate Action, told Europe.Table. Particularly in the case of critical raw materials for climate protection technologies such as batteries or wind turbines, dependencies must be reduced, the Green politician said.

The Commission is currently drafting a legislative package on the circular economy, which is scheduled for the end of March. Industry Commissioner Thierry Breton stayed tight-lipped about its specific contents. However, it is expected to include requirements for manufacturers of a wide range of products to make their goods durable and recyclable.

More controversial is the extent to which the EU states should produce the sought-after raw materials themselves to reduce dependence on imports. According to Breton, the EU could meet 20 to 25 percent of its demand for rare earths itself. However, this would require the corresponding processing capacities. For magnesium, which is needed in the automotive industry, the Commission has set a target of locating around 15 percent of global production in Europe by 2030. tho

Sustainable Aviation Fuels: EU countries call for more ambitious targets

A total of seven EU countries are appealing to the European Commission to allow more ambitious national targets in their climate protection plans for aviation. From the countries’ point of view, there is more room for maneuver concerning the use of so-called Sustainable Aviation Fuel (SAF), according to a letter from the countries to the responsible EU Commissioners Adina Vălean (Transport) and Frans Timmermans (Green Deal). To this end, the member states must be allowed to go beyond EU minimum standards.

The Commission’s “ReFuel EU Aviation” proposal is part of the Fit for 55 package and envisages a SAF quota of two percent in 2025. In 2030, the quota is to rise to five percent and, in further intermediate steps, to 63 percent by 2050. The signatory countries Denmark, Austria, Luxembourg, Sweden, Finland, the Netherlands, and Germany demand that countries be allowed to exceed these quotas individually.

SAFs are one of the most effective ways to reduce aviation emissions in the short and medium term, according to Tuesday’s letter obtained by Europe.Table. More ambitious targets in individual EU countries would also not distort competition within the Union. Higher targets could also provide the basis for developing new innovative approaches and technologies. SAF technologies are available, but investment is needed to increase production and reduce SAF costs, it said. Danish Environment Minister Dan Jorgensen complained that EU plans lagged behind those of his government. Denmark wants CO2-free air transport as early as 2030.

SAF are considered a promising alternative to fossil kerosene. The fuels are used because aviation is still a long way from electric or hydrogen propulsion for large aircraft. They can be prepared from organic waste, such as wood residues, animal fats, or cooking oil or produced synthetically by power-to-liquid processes. rtr/luk

German government allows sale of Siltronic to fail

Munich-based chip supplier Siltronic cannot be sold to Taiwan. As expected (Europe.Table reported), the German Ministry of Economics let the €4.35 billion takeover by larger rival Global Wafers fall through after a 14-month review. The government let the deadline by which the Taiwanese would have needed clearance under the Foreign Trade and Payments Act slip. In the end, time was too short to examine the consequences of the Chinese competition watchdog’s requirements for Siltronic, a ministry spokeswoman said Tuesday night. Global Wafers could, however, make a new attempt. Whether CEO Doris Hsu wants that, she left unanswered.

She described the lack of approval from Berlin as “very disappointing”. Global Wafers would “analyze the German government’s non-decision and examine its impact on our future investment strategy“. By Sunday, the company will decide how it will now invest the money Global Wafers would have spent on Siltronic. Conceivably, the company could build a new silicon wafer factory outside Europe to expand capacity. The Taiwanese are being courted fiercely from the USA.

The fact that Global Wafers is apparently not ruling out a second takeover bid sent Siltronic shares soaring by up to eight percent to €125.80 on Tuesday. Stock market experts are betting that Global Wafers would then have to offer more because the chip economy has picked up significantly since the first offer in the fall of 2020. Then the investment review by the German government would start all over again. Global Wafers still holds 13.7 percent of Siltronic.

Opposition supports decision

Hannes Walter (SPD), Vice Chairman of the Economic Affairs Committee, backed the decision: “We do not gain technological sovereignty by selling off our silverware,” he told Handelsblatt. Julia Klöckner, economic policy spokeswoman for the CDU/CSU parliamentary group in the Bundestag, pointed out that Germany is in demand as an investment location. “That is precisely why it is right that we also keep our security interests in mind.”

Siltronic major shareholder Wacker also criticized the decision from Berlin. “The merger would have created a leading supplier to the industry with strong European roots and a comprehensive product portfolio,” said Christian Hartel, CEO of the Munich-based chemicals group. This would also have been in the interests of the German and European chip industry. The family-owned company will thus lose €1.3 billion euros. Hartel still wants to part with the Siltronic share package of 30.8 percent but does not see Wacker under time pressure to do so. “The company is excellently positioned technologically and operates very profitably.” rtr

BSI awards first IT security label

The German Federal Office for Information Security (BSI) has awarded its first IT security mark to German email provider Mail.de. The seal of approval will help consumers recognize how secure an IT product is, BSI President Arne Schönbohm explained on Tuesday at the 18th German IT Security Congress.

Schönbohm announced that a broadband router would also be awarded such a quality seal in the foreseeable future. Other categories for the new label include the Internet of Things, smart TVs, and the smart home. He can well imagine that the IT security label will develop into a purchase criterion. The certificate is based on voluntary commitments by manufacturers, which are checked for plausibility by the BSI.

At the opening of the congress, Federal Minister of the Interior Nancy Faeser (SPD) had stated that the federal government wanted to ensure that in the future, manufacturers would be liable for damage caused negligently by software vulnerabilities in their products.

According to the minister, the BSI, which organized the digital congress, is to be expanded into a “central office in the federal-state relationship” and thus significantly improve federal cooperation. It is important to create the conditions for permanent coordination here. So far, the BSI’s support in the states has only been possible on a case-by-case basis through administrative assistance.

The Federal Office for IT Security is also providing the same kind of assistance abroad: The placement of false reports and warnings to the population on Ukrainian state websites a few weeks ago by hackers was “highly dangerous” in view of the tense situation, Faeser said. The German government had therefore offered Ukraine concrete assistance. If Ukraine so desired, the BSI could help clarify the incident and strengthen the resilience of Ukrainian systems. dpa

Jean-Bernard Lévy – France’s energy chief faces herculean task

Jean-Bernard Lévy is Chairman and Chief Executive Officer of the French energy group EDF.

Most people will have noticed it when looking at their last monthly bill: Electricity and gas are more expensive than ever. Political tensions with Russia are making European gas supplies unpredictable, fossil fuel prices skyrocketing, and the ongoing pandemic complicates everything even more. Jean-Bernard Lévy, CEO of Electricité de France (EDF), one of the world’s largest energy companies, has to counter this.

The media often refer to Jean-Bernard Lévy as the “captain of the French economy”. And it seems that he is always called in to help when the ship is in trouble. In 2002, companies like Vivendi and Thales brought him on board to straighten out their finances. And that’s probably what happened in 2014 when then-President François Hollande nominated Lévy for the post of CEO of EDF – a private limited company of which the French state owns 84 percent.

Faced with a debt mountain of €42 billion, the new head of the energy group took strict action in his first official acts: Minimize costs, freeze salaries and raise tariffs. But that was not enough. To steer the power producer out of economic turmoil, Lévy has brought with him a large-scale vision: France is to become the world champion of CO2 neutrality. He wants to achieve this not only through renewable energies but also by investing in nuclear power. This strategy went down well with Emmanuel Macron, who appointed him to lead the energy giant again in 2018 for a second term.

Nationalize nuclear energy, privatize renewables

But maintaining and expanding nuclear power, which generates over 75 percent of France’s electricity, is expensive. To meet these costs and equip EDF for the energy transition, Jean-Bernard Lévy is currently working on implementing the “Hercules” project. It involves negotiations with Brussels to raise tariffs for competitors to whom EDF sells electricity. This is no easy task because his own government has completely different plans.

In mid-January, Minister for the Economy and Finance Bruno Le Maire announced his intention to increase the volume of nuclear power sold by EDF to its competitors at reduced prices. In addition, the French government wants to limit the increase in regulated tariffs for electricity prices to four percent in 2022 in order to curb inflation and relieve consumers. However, this will be at EDF’s expense. This could cost the state-owned company up to €8.4 billion. Lévy described the decision of the Minister for the Economy as a “real shock”; unions had called for a strike last week. However, Lévy can barely defend himself against such state intervention, which could make it more difficult to implement his plans.

Lévy is also seeking to reorganize the company. Nuclear activities are to be nationalized, and parts of the power grid and the production of renewable energies are to be opened up to the private sector. Here, too, there is resistance. Critics fear that this would privatize the revenues from profitable renewable energies while shifting the burden of investment in nuclear energy onto citizens.

Whether Hercules is successfully implemented or Lévy restructures France’s energy supply in another way depends on various factors, not least the presidential elections. But the EDF boss is convinced that there must be a change: “The health crisis shows it, the gas crisis shows it: We are in a state of dependency. In calm times, the market seems stable, but as soon as there’s a problem, we have to admit to ourselves that it’s not working.” Giorgia Grimaldi

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

Decision day: Today, the European Commission plans to present its delegated act to supplement the taxonomy and, in it, classify nuclear energy and natural gas as sustainable transitional solutions under certain conditions. It remains to be seen whether the authority will rework its controversial draft. However, Finance Commissioner Mairead McGuinness had ruled out fundamental changes. Nevertheless, four EU countries insisted on further improvements shortly before the final decision: In a joint letter to the Commission, Austria, Denmark, Sweden, and the Netherlands demanded on Tuesday that natural gas should not be classified as “green”.

Around five months after its completion, the Nord Stream 2 Baltic gas pipeline is still not in operation. The German Federal Network Agency had suspended certification of the billion-euro project until the operating company implements the EU requirements for unbundling network operations and natural gas trading. Nord Stream 2 AG formally fulfilled the requirement last week by establishing a German subsidiary. Nevertheless, further checks are necessary, the BNetzA said.

At the same time, it is becoming increasingly doubtful whether the pipeline, which is supposed to transport Russian gas across the Baltic Sea to Germany, will ever become operational. After all, the infrastructure project is part of possible sanctions imposed by the West against Russia in the Ukraine conflict. During a visit to Kiev yesterday, EU Commission Vice President Valdis Dombrovskis assured Ukraine of support. He said the EU’s review of an operating permit for Nord Stream 2 was on hold and that Brussels would do everything it could to prevent the Kremlin from using the supply of natural gas “as a weapon”.

Nevertheless, a possible total loss of Russian gas supplies in Europe is perceived as a serious threat. The worst-case scenario once again highlights the EU’s energy import dependency. While the Commission is trying to find alternatives, discussions are also starting in Germany: Should we become more independent of Russian gas? The problem: The alternatives are scarce – and have major drawbacks. We asked politicians, industry, and academia.

Does the over 30-year-old Product Liability Directive from 1985 still offer sufficient legal certainty and consumer protection in the age of intelligent and AI-based products and services? Opinions differ on this. While consumer representatives favor revising the legislation, industry rejects the EU Commission’s move. In order to close possible regulatory gaps, the European Commission apparently even wants to adopt a two-pronged approach. The existing product liability directive is to be revised. In addition, a new liability framework for artificial intelligence is being discussed. Eugenie Ankowitsch has analyzed which aspects are particularly controversial.

Your
Timo Landenberger

Gas imports: expensive road to independence

Above all, natural gas had to be cheap and not too harmful to the climate. The argument of supply security has not carried too much weight so far – at least not in Germany. After all, Russia, by far the most important gas supplier, has always been reliable, so the common argument goes – even during the height of the Cold War.

However, the threat of a hot war in Ukraine has prompted a rethink. The EU Commission is currently trying to find alternatives to Gazprom and Co, also at the urging of the USA. In Brussels and in Washington, the danger that Moscow could respond to Western sanctions by cutting back or even stopping gas supplies to Europe is being taken seriously. On Friday, US President Joe Biden and Commission President Ursula von der Leyen had declared that they would work together to ensure a “continuous, sufficient and timely supply of natural gas to the EU”.

However, the Commission does not have a mandate from the member states to negotiate with potential energy suppliers. But that is not necessary for diplomatic initiatives in an area that is important for the entire EU, explained Commission spokesman Eric Mamer in Brussels. The Commission has been discussing ways to diversify energy supplies with international partners for some time.

Brussels is therefore in contact with Norway and Qatar. This Friday, Energy Commissioner Kadri Simson will also travel to Azerbaijan, and on Monday, she and EU Foreign Affairs Commissioner Josep Borrell will attend the EU-US Energy Council in Washington. But a meeting Simson had with Qatar’s energy minister on Tuesday yielded little progress: The amount of gas needed by the EU cannot be unilaterally replaced by anyone without affecting supplies to other regions in the world, Saad Sherida Al-Kaabi said. “Europe’s energy security requires a joint effort by many parties.”

Accelerated departure from Russian gas?

But what is currently still a precautionary measure for emergencies could usher in an accelerated departure from Russian gas. Europe wants to reduce its dependence on fossil fuels in the long term anyway via the Green Deal. “Given the tensions in the relationship with Russia, the question arises as to whether we should accelerate this process significantly and also be prepared to accept higher energy costs in return,” the foreign policy spokesman of the SPD parliamentary group, Nils Schmid, told Europe.Table. The discussion must now also be held within the German government.

Many agree on the goal: “We should get to the point where Russia can no longer use its energy supplies as leverage against us,” says Schmid. So far, according to the EU Commission, the EU imports around 40 percent of its gas from Russia; in Germany, the share is even higher. A supply freeze would therefore be difficult to offset, but deliberate public communication with potential additional energy partners alone makes geopolitical sense, says Austrian MEP Andreas Schieder (S&D). “If clear alternatives are pointed out to Russia in this context, then that is also a logical consequence of Russia’s deliberate provocation policy.”

Plans for LNG terminals in Germany

However, opinions differ on how the goal can actually be achieved. SPD politician Schmid points to the German government’s consideration of creating a strategic gas reserve. After all, Germany’s gas storage facilities are unusually empty; according to data from Gas Infrastructure Europe, the level was only just under 37 percent on January 30. To be better prepared in the future, Schmid does not rule out a government solution for the reserves.

The US government, in turn, is urging Europeans to rely more on liquefied natural gas from the United States or Qatar. 28 LNG terminals already exist in the EU, and new ones are being built: Greece, for example, recently announced plans to build a second terminal in Alexandroupolis. Meanwhile, German Chancellor Olaf Scholz also supports plans to build “one or more” LNG terminals in Germany, as government spokesman Steffen Hebestreit said on Monday.

Such plans have been around for some time but were not pursued vigorously in Germany. One reason: “It’s no secret that these terminals are pure door-openers for fracked gas from the US,” says CDU energy politician Markus Pieper. Green MEP Reinhard Bütikofer, therefore, warns that the EU is heading into an “alternative dead end”.

Bütikofer instead calls for an end to the Nord Stream 2 Baltic Sea pipeline: “As long as natural gas is part of our energy mix, we should push for Russia to remain dependent on Ukraine for gas exports to the EU.” This would create more security for Ukraine and prevent the “misinvestment in new fossil fuel infrastructure”.

High LNG prices threaten industry

Nina Scheer, energy policy spokeswoman for the SPD parliamentary group in the Bundestag, also points to the high cost of liquefied natural gas: “The question of further LNG volumes should not be answered without considering price effects.” Moreover, Russia has so far always met its supply obligations.

Natural gas is currently the most important energy source in the chemical industry and also an important raw material in production, said a spokesman for the German chemical industry association VCI. Ammonia production has already been curtailed at several sites due to the current high gas prices, and high gas prices have a negative impact on companies’ competitiveness, the VCI said. “More expensive LNG would exacerbate these effects.”

E.ON CEO Leonhard Birnbaum also points to the limited availability of liquefied natural gas. A large LNG tanker could transport about as much gas as Nord Stream 1 in one day. Nord Stream 2 is therefore difficult to replace, especially if Germany relies more on gas to replace coal-fired power plants. “Then we should not think about how to do it without Russian gas.”

Without Russian imports, energy supply would become “very difficult and, above all, very expensive,” says Christian Egenhofer, a researcher at the Centre for European Policy Studies (CEPS). That’s because it would then depend almost entirely on the global market order. “If the economy is booming in Asia, gas prices will rise, and Europe will have to top them to avoid losing supplies.”

High gas prices, in turn, would lead to more coal being burned to generate electricity. And energy-intensive industries that depend on the use of natural gas in their manufacturing processes would have to cut back or cease production.

Existing infrastructure is not sufficient

According to Jacopo Pepe, an energy expert at the German Institute for International and Security Affairs (Stiftung Wissenschaft und Politik), it is also questionable whether the required gas volumes could even be handled by existing LNG terminals and infrastructure. “We have about 110 billion cubic meters of spare capacity in the EU. If Russian supply were to stop altogether, we would still be about 30 to 40 billion cubic meters short.”

The Brussels-based think tank Bruegel comes to a similar conclusion. According to a study, Russian natural gas exports to the EU in 2021 would amount to 1,550 TWh via pipelines and around 120 TWh via LNG tankers. This means that around 1,700 TWh would need to be replaced if Russia were to stop its natural gas exports to Europe completely, but the existing terminals could only handle about 1,100 TWh of additional LNG imports to the EU, the document says.

In addition, the EU gas network would also face a challenge in the event of a corresponding conversion, the authors write. After all, this network is designed to bring imports from the east to the west to the consumers. However, according to energy expert Pepe, this is also technically feasible the other way around. “The liquefied gas is vaporized in the port terminals and fed into the gas network. If necessary, the direction of flow would have to be changed in some pipelines.” But that, too, is nothing new. After all, Germany is currently exporting Russian natural gas to Ukraine in the opposite direction to the usual one.

And environmental concerns about fracked gas production also need to be put into perspective: “With pipelines, you have leakage. With LNG, you have both emissions during transport and significant environmental damage during fracking,” Pepe says. In environmental terms, it’s figuratively speaking a choice between the devil and the deep blue sea.Till Hoppe, Timo Landenberger, Stephan Israel and Lukas Scheid

Product liability and AI: Commission working on new rules

By

Eugenie Ankowitsch

The Product Liability Directive applies to all moving products regardless of the technology they use, and therefore actually also to AI-controlled products. It is intended to provide protection at a level not covered by national fault-based liability alone. It establishes a system of strict liability for the manufacturer.

However, an evaluation commissioned by the EU Commission found that its outdated concepts and terminology made it difficult to apply the directive to products in the digital economy and the circular economy. It was also complicated for consumers to obtain compensation. Especially when proving that complex products were defective and caused the damage. Whether intangible items such as digital content, software, algorithms and data are covered by the directive, especially if they are provided separately from a tangible product, is also not clear.

Revision of the Product Liability Directive

In order to close the regulatory gaps identified in the report, the European Commission apparently wants to adopt a two-pronged approach. On the one hand, the existing product liability directive must be revised. In addition, a new liability framework for artificial intelligence is being discussed. A proposal for a corresponding directive could come in the 3rd quarter of 2022.

Consumer organizations and NGOs welcome the Commission’s initiative. For example, the European Consumers’ Organisation (Bureau Européen des Unions de Consommateurs, BEUC) recommends a comprehensive revision of the EU Product Liability Directive in its statement on the EU Commission’s consultation. From the consumer perspective, the directive is no longer up to the challenges of new technologies and leaves many questions unanswered.

Redefinition of key terms

For example, it is essential to review and update key terms such as “product”, “defect” and “damage”. BEUC also calls for the time when a product is placed on the market to no longer be the decisive time for assessing defectiveness.

Although the definition of “product” in the Product Liability Directive is broad, its scope could be further clarified, the Commission report on the impact of artificial intelligence, the Internet of Things, and robotics in terms of safety and liability also states. This would take better account of the complexity of new technologies.

Unsurprisingly, the industry is against a revision of the liability directive. “The existing legal framework has deliberately been designed to be open to technology. It has proven itself and works well. Even the changes brought about by the digital age do not make a revision necessary,” states a statement from the German Medical Technology Association (BVMed). Interfering with this system could lead to additional costs, especially for small and medium-sized companies. As a result, urgently needed investments could be postponed.

Reversal of the burden of proof: a no-go for the industry

A possible reversal of the burden of proof in favor of consumers is particularly controversial. AI applications are often integrated into complex IoT (Internet of Things) environments where many different networked devices and services interact. Due to the complexity of these technologies, it can be very difficult for victims to identify the liable party and prove all the requirements necessary under national law for a successful claim. The cost of doing so could be economically prohibitive and discourage victims from seeking compensation, the EU Commission report says.

For this reason, a reversal of the burden of proof or at least a lightening of the burden is now being discussed. This would primarily affect national regulations. According to the European Product Liability Directive, a product that does not comply with mandatory safety regulations is considered defective, regardless of the manufacturer’s fault.

The industry strictly rejects the reversal of the burden of proof. According to BVMed, there is already an appropriate distribution of the burden of proof under current European and national law, including the easing of the burden of proof. Rigid rules of evidence or even a general reversal of the burden of proof would run the risk of destroying the “carefully balanced risk relationship” between companies and consumers. In addition, it should be borne in mind that a reversal of the burden of proof would represent a major encroachment on national civil procedural law.

The European Consumers’ Association, on the other hand, is in favor. Currently, the hurdles for plaintiffs are too high. The digital context has even exacerbated the difficulties in providing evidence and increased the information asymmetries between plaintiffs and defendants, the consumer representatives’ statement says.

Taking intangible damage into account

The idea of extending the list of claims to include non-material (e.g., psychological) damage, loss of data, or environmental damage is also likely to provoke heated debate. For example, a manufacturer of AI-assisted humanoid robots could be required to take into account the non-material harm their products might cause to vulnerable users such as elderly people in need of care. Currently, each member state can decide for itself whether to compensate for non-material harm.

BVMed rejects this proposal. The General Data Protection Regulation already covers damages in connection with data protection violations or a loss of data. A claim for damages in relation to environmental damage should – insofar as this is deemed necessary – be regulated by special legislation in corresponding environmental laws. In addition, the association emphasizes that strict liability under the Product Liability Directive is subject to strict challenges and should only apply to particularly important legal assets.

A separate policy for AI

For high-risk AI systems, the Commission apparently wants to develop its own liability rules. Due to their specific characteristics, such as complexity, connectivity, autonomy, and opacity, and the associated “black box effect”, it could, in the Commission’s view, be difficult for injured parties to obtain compensation based on the Product Liability Directive or national rules on fault-based liability. This is because it is particularly difficult to prove the defectiveness of a product or fault and the causal connection with the damage in these systems.

Here, too, BVMed is opposed to a new legal framework. The feared complexity of learning systems should rather be addressed in transparent specifications for the development and documentation of the systems at the regulatory level. According to the BVMed statement, the responsible party is also liable for violations of these material requirements under the current system.

Careful coordination required

The consumer association BEUC also believes that many of the problems associated with digital and artificial intelligence could be solved by an ambitious revision of the Product Liability Directive. From consumers’ point of view, it does not matter into which category the AI system that caused the damage was classified.

The association also calls on the Commission to carefully align the various civil liability initiatives and EU legislation currently pending, including the Digital Services Act, the revision of the General Product Safety Directive, and the AI Regulation. All of these initiatives are closely intertwined in practice and need to be considered together.

EU states want to become more independent in raw materials

EU countries want to reduce dependence on other countries for critical raw materials. “We need to prepare for future supply chain disruptions,” said Commission Vice President Maroš Šefčovič after the informal Competitiveness Council in Lens, France. These were “not a question of if, but when“. Europe is currently heavily dependent on a small number of non-EU countries, which, moreover, often have lower environmental and social standards.

There was broad support among member states for entering into new raw material partnerships with countries such as Canada for diversification. Massive investment in research is also needed to reduce the demand for critical raw materials, for example, in battery production, said Agnes Pannier-Runacher, the French industry secretary. For lithium, for instance, record prices are already being seen, and a shortage is foreseeable, Šefčovič warned.

Germany and other member states also advocated for legal requirements for resource efficiency and the recycling of raw materials. “The Commission should present an ambitious legislative package to boost the circular economy for raw materials,” Franziska Brantner, Parliamentary State Secretary at the German Federal Ministry for Economic Affairs and Climate Action, told Europe.Table. Particularly in the case of critical raw materials for climate protection technologies such as batteries or wind turbines, dependencies must be reduced, the Green politician said.

The Commission is currently drafting a legislative package on the circular economy, which is scheduled for the end of March. Industry Commissioner Thierry Breton stayed tight-lipped about its specific contents. However, it is expected to include requirements for manufacturers of a wide range of products to make their goods durable and recyclable.

More controversial is the extent to which the EU states should produce the sought-after raw materials themselves to reduce dependence on imports. According to Breton, the EU could meet 20 to 25 percent of its demand for rare earths itself. However, this would require the corresponding processing capacities. For magnesium, which is needed in the automotive industry, the Commission has set a target of locating around 15 percent of global production in Europe by 2030. tho

Sustainable Aviation Fuels: EU countries call for more ambitious targets

A total of seven EU countries are appealing to the European Commission to allow more ambitious national targets in their climate protection plans for aviation. From the countries’ point of view, there is more room for maneuver concerning the use of so-called Sustainable Aviation Fuel (SAF), according to a letter from the countries to the responsible EU Commissioners Adina Vălean (Transport) and Frans Timmermans (Green Deal). To this end, the member states must be allowed to go beyond EU minimum standards.

The Commission’s “ReFuel EU Aviation” proposal is part of the Fit for 55 package and envisages a SAF quota of two percent in 2025. In 2030, the quota is to rise to five percent and, in further intermediate steps, to 63 percent by 2050. The signatory countries Denmark, Austria, Luxembourg, Sweden, Finland, the Netherlands, and Germany demand that countries be allowed to exceed these quotas individually.

SAFs are one of the most effective ways to reduce aviation emissions in the short and medium term, according to Tuesday’s letter obtained by Europe.Table. More ambitious targets in individual EU countries would also not distort competition within the Union. Higher targets could also provide the basis for developing new innovative approaches and technologies. SAF technologies are available, but investment is needed to increase production and reduce SAF costs, it said. Danish Environment Minister Dan Jorgensen complained that EU plans lagged behind those of his government. Denmark wants CO2-free air transport as early as 2030.

SAF are considered a promising alternative to fossil kerosene. The fuels are used because aviation is still a long way from electric or hydrogen propulsion for large aircraft. They can be prepared from organic waste, such as wood residues, animal fats, or cooking oil or produced synthetically by power-to-liquid processes. rtr/luk

German government allows sale of Siltronic to fail

Munich-based chip supplier Siltronic cannot be sold to Taiwan. As expected (Europe.Table reported), the German Ministry of Economics let the €4.35 billion takeover by larger rival Global Wafers fall through after a 14-month review. The government let the deadline by which the Taiwanese would have needed clearance under the Foreign Trade and Payments Act slip. In the end, time was too short to examine the consequences of the Chinese competition watchdog’s requirements for Siltronic, a ministry spokeswoman said Tuesday night. Global Wafers could, however, make a new attempt. Whether CEO Doris Hsu wants that, she left unanswered.

She described the lack of approval from Berlin as “very disappointing”. Global Wafers would “analyze the German government’s non-decision and examine its impact on our future investment strategy“. By Sunday, the company will decide how it will now invest the money Global Wafers would have spent on Siltronic. Conceivably, the company could build a new silicon wafer factory outside Europe to expand capacity. The Taiwanese are being courted fiercely from the USA.

The fact that Global Wafers is apparently not ruling out a second takeover bid sent Siltronic shares soaring by up to eight percent to €125.80 on Tuesday. Stock market experts are betting that Global Wafers would then have to offer more because the chip economy has picked up significantly since the first offer in the fall of 2020. Then the investment review by the German government would start all over again. Global Wafers still holds 13.7 percent of Siltronic.

Opposition supports decision

Hannes Walter (SPD), Vice Chairman of the Economic Affairs Committee, backed the decision: “We do not gain technological sovereignty by selling off our silverware,” he told Handelsblatt. Julia Klöckner, economic policy spokeswoman for the CDU/CSU parliamentary group in the Bundestag, pointed out that Germany is in demand as an investment location. “That is precisely why it is right that we also keep our security interests in mind.”

Siltronic major shareholder Wacker also criticized the decision from Berlin. “The merger would have created a leading supplier to the industry with strong European roots and a comprehensive product portfolio,” said Christian Hartel, CEO of the Munich-based chemicals group. This would also have been in the interests of the German and European chip industry. The family-owned company will thus lose €1.3 billion euros. Hartel still wants to part with the Siltronic share package of 30.8 percent but does not see Wacker under time pressure to do so. “The company is excellently positioned technologically and operates very profitably.” rtr

BSI awards first IT security label

The German Federal Office for Information Security (BSI) has awarded its first IT security mark to German email provider Mail.de. The seal of approval will help consumers recognize how secure an IT product is, BSI President Arne Schönbohm explained on Tuesday at the 18th German IT Security Congress.

Schönbohm announced that a broadband router would also be awarded such a quality seal in the foreseeable future. Other categories for the new label include the Internet of Things, smart TVs, and the smart home. He can well imagine that the IT security label will develop into a purchase criterion. The certificate is based on voluntary commitments by manufacturers, which are checked for plausibility by the BSI.

At the opening of the congress, Federal Minister of the Interior Nancy Faeser (SPD) had stated that the federal government wanted to ensure that in the future, manufacturers would be liable for damage caused negligently by software vulnerabilities in their products.

According to the minister, the BSI, which organized the digital congress, is to be expanded into a “central office in the federal-state relationship” and thus significantly improve federal cooperation. It is important to create the conditions for permanent coordination here. So far, the BSI’s support in the states has only been possible on a case-by-case basis through administrative assistance.

The Federal Office for IT Security is also providing the same kind of assistance abroad: The placement of false reports and warnings to the population on Ukrainian state websites a few weeks ago by hackers was “highly dangerous” in view of the tense situation, Faeser said. The German government had therefore offered Ukraine concrete assistance. If Ukraine so desired, the BSI could help clarify the incident and strengthen the resilience of Ukrainian systems. dpa

Jean-Bernard Lévy – France’s energy chief faces herculean task

Most people will have noticed it when looking at their last monthly bill: Electricity and gas are more expensive than ever. Political tensions with Russia are making European gas supplies unpredictable, fossil fuel prices skyrocketing, and the ongoing pandemic complicates everything even more. Jean-Bernard Lévy, CEO of Electricité de France (EDF), one of the world’s largest energy companies, has to counter this.

The media often refer to Jean-Bernard Lévy as the “captain of the French economy”. And it seems that he is always called in to help when the ship is in trouble. In 2002, companies like Vivendi and Thales brought him on board to straighten out their finances. And that’s probably what happened in 2014 when then-President François Hollande nominated Lévy for the post of CEO of EDF – a private limited company of which the French state owns 84 percent.

Faced with a debt mountain of €42 billion, the new head of the energy group took strict action in his first official acts: Minimize costs, freeze salaries and raise tariffs. But that was not enough. To steer the power producer out of economic turmoil, Lévy has brought with him a large-scale vision: France is to become the world champion of CO2 neutrality. He wants to achieve this not only through renewable energies but also by investing in nuclear power. This strategy went down well with Emmanuel Macron, who appointed him to lead the energy giant again in 2018 for a second term.

Nationalize nuclear energy, privatize renewables

But maintaining and expanding nuclear power, which generates over 75 percent of France’s electricity, is expensive. To meet these costs and equip EDF for the energy transition, Jean-Bernard Lévy is currently working on implementing the “Hercules” project. It involves negotiations with Brussels to raise tariffs for competitors to whom EDF sells electricity. This is no easy task because his own government has completely different plans.

In mid-January, Minister for the Economy and Finance Bruno Le Maire announced his intention to increase the volume of nuclear power sold by EDF to its competitors at reduced prices. In addition, the French government wants to limit the increase in regulated tariffs for electricity prices to four percent in 2022 in order to curb inflation and relieve consumers. However, this will be at EDF’s expense. This could cost the state-owned company up to €8.4 billion. Lévy described the decision of the Minister for the Economy as a “real shock”; unions had called for a strike last week. However, Lévy can barely defend himself against such state intervention, which could make it more difficult to implement his plans.

Lévy is also seeking to reorganize the company. Nuclear activities are to be nationalized, and parts of the power grid and the production of renewable energies are to be opened up to the private sector. Here, too, there is resistance. Critics fear that this would privatize the revenues from profitable renewable energies while shifting the burden of investment in nuclear energy onto citizens.

Whether Hercules is successfully implemented or Lévy restructures France’s energy supply in another way depends on various factors, not least the presidential elections. But the EDF boss is convinced that there must be a change: “The health crisis shows it, the gas crisis shows it: We are in a state of dependency. In calm times, the market seems stable, but as soon as there’s a problem, we have to admit to ourselves that it’s not working.” Giorgia Grimaldi