CO2 price crash + Sanctions against olig • Table.Briefings

Dear reader,

The price per ton of CO2 in the ETS has fallen by around 30 percent since the start of the war in Ukraine. However, the war seems to be only the trigger of the price crash. The causes lie elsewhere, as Lukas Scheid shows. Attempts at explanation range from panic selling to the previous overvaluation of the market to a newly ignited dynamic in the expansion of renewables.

In recent days, the EU has imposed sanctions of a gigantic scale on Russian elites and companies. Although it now wants to wait and see the effects before imposing more (read more in the news). But research shows how hard it is to actually hit Russian oligarchs with the sanctions. Indeed, many of the billionaires have their financial operations in Luxembourg, Luc Caregari explains.

German Economics Minister Robert Habeck (Greens) said yesterday that there would be no import ban on Russian oil, gas, or coal. He fears endangering the “social peace in the republic”. More on this in the news.

Your
Lisa-Martina Klein

CO2 price crash in the ETS: causes and impact

By

Lukas Knigge

For energy companies, it’s good news at a time when there is little such news. The CO2 price in the European Emissions Trading System (ETS) has crashed in recent days. While it stood at around €95 per ton of CO2 in the middle of last week, by Thursday, it had fallen to around €66. With electricity and gas prices rising for months, the relief this has provided is extremely small, but concerns about further price increases in the ETS have recently been enormous.

How big the impact of the price drop actually is for energy companies and industry depends on whether the price stays at the current level or whether emission rights soon become more expensive again. The price drop will have only a very limited impact on the chemical industry, explains VCI energy expert Jörg Rothermel to Europe.Table. Many companies had already stocked up on certificates for the moment. According to Rothermel, the wholesale price of electricity, in particular, could be somewhat dampened in the short term. “Whether companies will benefit is not something that can be said across the board. Many companies operate in whole or in part with long-term electricity supply contracts.”

Reasons for the CO2 price increase

The question arises as to the cause of the price crash. The war in Ukraine was the trigger, but the invasion of the neighboring country by Russian troops is not sufficient as an explanation. The NGO Green Finance Observatory assumes that it was primarily profit-taking on speculative positions. The theory: The market was overheated anyway; the price of €95 per ton of CO2 resulted from an overvalued market. Market participants in the ETS sold their overvalued emission rights in view of the war in Ukraine – the price fell.

Peter Liese (EPP/CDU), rapporteur in the EU Parliament for ETS reform, also thinks this is likely. “I suspect that some investors who thought that the ETS is a goldmine and you will only ever see rising prices have now become nervous,” he told Europe.Table. The anticipated slump in the economy associated with the war, he said, means fewer allowances will be needed and prices will fall.

Today’s certificate purchaser only known after 3 years

However, it is not so easy to check whether this theory is actually correct. After all, it is not immediately possible to see which market participants buy and sell how many CO2 certificates. Only after three years do we find out who is active in the ETS today, explains Florian Rothenberg, emissions trading analyst at ICIS.

He is also convinced that the market was recently overheated and that the current price drop is merely a correction. The fact that the CO2 price is now falling despite rising gas prices and the increased switch to coal is a sign that the CO2 price was recently no longer at the level of the actual CO2 avoidance costs. The current “fuel switch” to dirtier coal had already been priced at €95 per ton of CO2.

In any case, the structure of the CO2 market is such that short-term events are usually not reflected so strongly in the price, since it is not a physical product with storage costs and market participants usually hold the certificates for a long time. Therefore, the war alone is not sufficient to explain the price crash.

New momentum in the energy transition

In addition, according to Rothenberg, the energy transition is now a matter of national security rather than just a path to decarbonization. This has developed a whole new dynamic among market participants. Before companies were skeptical about the expansion plans for renewables, but now there is a new driver that goes beyond the economic incentive of the ETS. Rothenberg believes that government subsidies and private investment could henceforth drive the expansion of renewables even faster than the ETS cap-and-trade system would have. This decreases the price of CO2 because the market is decarbonized in an intrinsically motivated, rather than externally regulated, manner.

The ICIS data analyst suspects that another reason for the price drop is the uncertainty on the market as to which direction the political discourse will now take: Suddenly, due to Robert Habeck’s announcement – the continuation of nuclear power is no longer ruled out – there is a mood on the markets that anything is possible. Thus, it cannot be ruled out that the Fit for 55 package will either be significantly delayed or watered down. Just as announcements of an ambitious European climate policy caused the price of CO2 to soar, the prospect of watering it down could depress the price.

ETS rapporteur Peter Liese, however, wants to prevent this and now wants to stick all the more to the ambitions of the Green Deal. He is calling for an ambitious expansion of renewables and an increase in energy efficiency right now. The discussion about a minimum CO2 price is also getting new food for thought now, he said, as investors need certainty. “A crash to €60 or €50 is, of course, no problem at all from this point of view because the price is still significantly higher than two years ago.” But a complete crash would be dangerous for investors. He, therefore, advocates stronger controls and more transparency in the CO2 price, so that sharp price rises and falls can be better monitored and analyzed in the future.

Sanctions against Russian oligarchs are difficult to implement

As bombs fall on Kyiv, Russian banks, conglomerates, ministers, and oligarchs are being hit by sanctions that seemed unimaginable just a week ago. The European Union’s current list includes 26 individuals and one company. One fact makes the Russian economy particularly vulnerable: more than half of the wealth of Russia’s richest 0.01 percent is located outside the Russian Federation. The European authorities could therefore access it more easily.

Luxembourg’s policy of opening up to the Russian economy attracted a lot of money from oligarchs as early as the Cold War era. It is true that the financial center is not the preferred banking location of the Russian economic elites. But the Grand Duchy is an important cog in the offshore constructions of some oligarchs and their banks. They use the Grand Duchy to funnel money through. Research shows that Luxembourg often serves as a link to another European financial center: Cyprus.

Many Russian businesses are conducted through the island in the Eastern Mediterranean before reaching Luxembourg. In many cases, a Luxembourg holding company is used to establish a company and register it in the Commercial Register. Then the shareholders are changed. These are often Cypriots and entities registered in the British Virgin Islands or other offshore jurisdictions.

Russia Commercial Bank changes ownership structure

It’s therefore no coincidence that one of the Russian banks based in Luxembourg, the “Russia Commercial Bank” (RCB), is the branch of a parent company in Cyprus. The example of RCB also shows that the bank has prepared for the sanctions. Before the Russian invasion of Ukraine, almost 50 percent of the bank’s capital was owned by the Russian state-owned bank VTB. On February 23, the EU adopted the first round of sanctions, which also targeted the bank’s leadership in Moscow. On February 24, RCB announced a change in its ownership structure: the bank is now owned by two Cypriot companies.

RCB confirmed on request: “VTB has decided to sell its shares and we have announced this on our website”. RCB was “a systemically important Cypriot bank subject to supervision by the European Central Bank.” At the request of Reporter.lu, Luxembourg’s financial regulator CSSF said that the change in ownership structure still had to be approved by the ECB.

Among the personalities sanctioned by the EU is Igor Shuvalov, formerly prime minister under President Dmitry Medvedev. He heads Russia’s state development bank, VEB. The bank also has a presence in Luxembourg through its VEB Leasing branch.

The latest annual report reveals that the Luxembourg branch is owned by a Cypriot company called “Genetechma Finance Limited”. This appears in the “FinCen Files” of the International Consortium of Investigative Journalists (ICIJ) and “Buzzfeed News.” In their 2020 research, the American journalists describe how “Genetechma Finance Limited” was used to orchestrate a deal to sell Russian helicopters to the government of North Sudan – which was under sanctions at the time.

Mikhail Fridman on sanctions list

Gazprombank is not yet on the European sanctions list, but it is on the US sanctions list. Already since 2016, the Luxembourg branch Bank GBP International has been sanctioned by the US. However, this has not prevented Luxembourg’s former ambassador to Russia, Jean-Claude Knebeler, from sitting on the sustainability council of the Moscow-based parent company. The bank published its latest annual report in 2018, and the fact that German MPs ensured that Gazprombank was not excluded from the Swift system, pointing out that the bank was Luxembourgian – did not meet enthusiasm among Luxembourgian MPs, Reporter.lu has been told.

Some of the oligarchs affected by the recent EU sanctions are also represented in Luxembourg. Mikhail Fridman, for example: according to the OpenLux database, Fridman owns shares in no fewer than 67 companies in the Grand Duchy. In the sanctions decision, the founder of the Alfa Group conglomerate is described as “one of the most important Russian financiers and an aide to Putin’s inner circle.” It says he managed to acquire state property thanks to his connections in the state apparatus. The businessman founded the LetterOne investment company in Luxembourg in 2013, which has €7 billion in assets, according to its latest annual report.

Since February 28, Gennady Timchenko is also on the EU list. This is not a new experience for Timchenko: in 2014, the founder of the Gunvor Group, which specializes in commodities trading, sold his shares to his partner, billionaire Torbjörn Tornqvis. That was then shortly before the US imposed sanctions.

Opaque social structures

The oligarch has since established a private investment company, Volga Group, which is active in the gas, petrochemical, and construction sectors. The Luxembourg entities associated with Volga Group have been dissolved. Nevertheless, two holdings of Timchenko remain active in Luxembourg. One holds 49 percent of Arena Events Oy, the company behind the Hartwall Ice Hockey Arena in Finland. The other 51 percent is in the hands of the Rotenberg family, which is close to Putin. Tymchenko’s other holding includes a purchase agreement for a Gulfstream G650 private jet – which should have been issued in 2017. But US sanctions prevented delivery.

Less well known, but just as close to power in Moscow, is Alisher Usmanov: He is said to have made his luxurious residences available to Dmitry Medvedev. The oligarch, who bought the business newspaper Kommersant and gave it a pro-Kremlin, anti-Ukrainian line, owns two companies in the Grand Duchy. One is a special limited partnership. It is not regulated by Luxembourg’s CSSF regulator and has little transparency. For example, it has not published an annual report.

The other company of the oligarch is registered as a telecommunications company: MegaFon Luxembourg. It is a subsidiary of the third-largest Russian telecommunications operator, controlled by a Cypriot company. However, it does not seem to have been very active since its establishment. Its assets did not exceed €20,000. Its sole administrator resigned on March 1, 2022.

Interinstitutional committee

Given the extensive presence of Russian oligarchs and companies associated with them in Luxembourg, the question arises as to how the government there will proceed with the identification and freezing of assets. When asked about the implementation of the EU sanctions decision, the Ministry of Finance simply replied, “The sanctions will enter into force upon their adoption.”

The new Finance Minister, Yuriko Backes, presented a bill that provides for the establishment of an inter-institutional committee that includes representatives from the Ministry of Finance, the Ministry of Foreign Affairs, and the Ministry of Justice, among others. This establishment is a response to the 2012 recommendations of the Financial Action Task Force (FATF), which the ministry believes is sufficient to align the legal and administrative framework with a law on financial sanctions adopted in December 2020. Luc Caregari, Reporter.lu

IEA: EU can greatly reduce dependence on gas

Europe could reduce its imports of Russian gas by more than a third within a year, according to the International Energy Agency (IEA). The German government should even prepare for a complete trade freeze with Russia, said Jens Südekum, a member of the Scientific Advisory Board of the German Ministry of Economics. The prices for oil and gas would then rise again sensitively. Christian Ehler (EPP), a member of the European Parliament, also sees an “economic war” coming. “It is very realistic that not only we will reduce consumption from Russia, but that Russia will stop supplying gas to Europe,” Ehler warned the Parliament’s Industry Committee.

Calls from other countries for a ban on imports of oil, gas, or coal from Russia were rejected yesterday by German Economics Minister Robert Habeck (Greens). “I would even speak out against it because we would endanger social peace in the republic,” he said after a meeting with business representatives.

IEA wants higher gas reserve than Habeck

Habeck’s plan for a national gas reserve, meanwhile, comes into conflict with recent demands by the International Energy Agency. By October 1, the EU’s gas storage facilities would have to be 90 percent full to provide sufficient backup for next winter, the IEA said. By contrast, the draft law for a gas reserve in Germany provides for only 80 percent. The Economics Ministry believes it will be able to achieve the 90 percent by December.

With a ten-point plan, the IEA wants to support the EU in being able to do without part of the annual gas supplies from Russia of 155 billion cubic meters (bcm) in the short term. According to the IEA analysis, other suppliers could deliver up to 30 bcm in the short term, one-third of it via existing pipelines and two-thirds as liquefied natural gas (LNG). A prerequisite, however, is that both the EU and supplier countries take action against methane leaks in production and infrastructure, he said.

Other measures focus on reducing gas consumption across the sectors or replacing it with other energy sources. Higher utilization of nuclear power plants and biogas plants would bring 13 bcm. According to the IEA, renewable energies could generate an additional 35 terawatt-hours of electricity this year, so that the consumption of gas-fired power plants could fall by 6 bcm.

Less heating would bring high savings

According to the IEA, the greatest short-term contribution in the building sector would come from restrictions on heating. In its calculation, the agency included 10 bcm saved by lowering the room temperature by 1 degree.

Replacing gas heating with heat pumps would save 2 bcm of gas in the first year. Energy efficiency could contribute a further 2 bcm, but this would require, among other things, increasing the annual renovation rate from 1 to 1.7 percent of all buildings – something Germany has failed to do for many years. Smaller efficiency measures without investment would bring only small savings, at least according to the IEA.

However, according to the IEA, part of the savings will be needed to refill the comparatively empty gas storage facilities. Overall, the agency expects that Russian imports could fall by 50 bcm. According to the agency, the reduction could even exceed 80 bcm if the EU were to rely on coal and oil-fired power plants again to a greater extent. However, this would run counter to the climate protection goals. ber, rtr

EU official: “we still have many ideas for further sanctions”

The European Union is waiting to see the impact of a slew of sanctions on Russia before imposing any more, but it is working on further steps that could include targeting crypto-assets, officials said on Thursday. “Our aim is to cut the Kremlin’s capacity to wage war on its neighbors,” European Commission President Ursula von der Leyen said after a meeting with Romanian President Klaus Iohannis.

The 27-member bloc has approved an array of financial, energy, export, and travel bans since last week. These have included a freeze on Russian central bank assets, the shutdown of EU airspace to Russia, the removal of a number of Russian banks from the SWIFT international payments system, and sanctions on a clutch of Russian tycoons.

Crypto assets targeted

“We still have many ideas how we can take work forward when it comes to sanctions, whether it’s on trade, whether it’s on energy, whether it’s on exports, on …. shipping,” said one EU official on condition of anonymity. “So it is being worked on as we speak. But I think the spirit now … is that we see the implementation and the effect of what we have done so far.”

A second EU official said that while the West waits for its sanctions to take effect, an analysis is underway on how to target Russian crypto assets and how to ensure Belarus cannot be used by the Russians as a loophole to get around the sanctions.

A second EU official said that while the bloc waits for its sanctions “to bite” there is analysis underway on how to target Russian crypto assets and work on how to “make sure that Belarus can’t be used as a loophole” by Russians to sidestep sanctions.

The officials said Russia appeared to have been surprised by the intensity of EU sanctions and counter-measures have come with a time lag, though it has reciprocally closed its airspace to countries that have banned Russian airlines. The EU has stopped short of curbing energy imports from Russia, which provides more than a third of Europe’s gas imports and more than a quarter of its oil imports, but is looking for alternative supplies in case of Russian retaliation and trying to diversify its energy-use mix. “We need to get independent from Russian gas, oil, and coal,” von der Leyen said. “Our resolve to go forward, in this case, is stronger than ever.”

EU wants to take in war refugees quickly

War refugees from Ukraine could be granted a one-year right of residence in the European Union as early as in the next few days. The EU states agreed on Thursday to accept the refugees quickly and without complications. EU Commissioner for Home Affairs Ylva Johansson spoke of a historic decision.

“We have to prepare for millions of refugees coming to the European Union,” Johansson said on the sidelines of a meeting of EU interior ministers in Brussels. More than a million people have already left the country since the war began, according to the UN refugee agency UNHCR. More than 500,000 people have sought refuge in Poland alone.

Initially, 5,500 people were registered in Germany, said Federal Interior Minister Nancy Faeser (SPD) on Deutschlandfunk radio. In fact, significantly more refugees are likely to have already arrived. Many of them travel directly to relatives and friends – without registering with the authorities. The focus is on Berlin, among other places. On Wednesday alone, five trains had arrived from Warsaw with a total of 3,000 to 4,000 people, said Social Senator Katja Kipping (Left Party). “Today there are again significantly more who come in total.” Kipping stressed, “What is coming is going to be enormous.”

Relieve asylum authorities

Ukrainians with biometric passports are allowed to move freely in the EU for 90 days without a visa. However, one must be prepared for the 91st day, Johansson said last. That is why the EU Commission proposed to use the directive for the first time for the “mass influx” of displaced persons. The EU states now agreed, final details are likely to be worked out at ambassadorial level.

The directive was created as a result of the wars in the former Yugoslavia in the 1990s and is also intended to prevent asylum authorities from being overburdened. The Federal Office for Migration and Refugees, for example, groaned under the large number of asylum applications during and after the great flight movement in 2015 and 2016. Those seeking protection are granted certain rights throughout the EU, such as access to social assistance and a work permit.

The common migration and asylum policy is not normally a field in which the EU states show themselves to be on the same page. For years, they have argued bitterly about the distribution of asylum seekers in particular. Fierce opposition to mandatory distribution comes above all from states such as Poland and Hungary, which are now particularly affected by the flight movement from Ukraine.

Suddenly, the EU shows itself united, as it did with the tough sanctions against Russia. All countries are ready to take in the refugees, Faeser said. This is “a bit of a paradigm shift,” she said. And she added: “I hope that this humanity will also be maintained.” dpa

Macron announces presidential candidacy

France’s President Emmanuel Macron is running for a second term, as expected. “We have not achieved everything we set out to do,” he wrote in a letter published Thursday by several newspapers. “There are decisions I would probably make differently now with the experience I have gained from you.”

Macron enters the race for the presidency just about a month before the first round of voting on April 10. According to polls, Macron is the favorite for the first round of the election. Should he succeed, he would be the first French head of government in two decades to run for another term.

The Ukraine war has already shaken up the election campaign and made Macron’s entry into the race more difficult. Eric Zemmour and Marine Le Pen, far-right candidates who had previously done well in polls, had to explain their previously pro-Russia and pro-Putin stances.

With Macron spearheading European efforts to find a cease-fire and peaceful resolution to the conflict, an election campaign with fewer rallies by the incumbent and an unusual focus on foreign policy looms. rtr

Health data: legal interpretation and data governance biggest problems

Different legal interpretations and data management practices in Europe cause most of the problems in health data exchange. This is the conclusion reached by the Towards the European Health Data Space (TEHDAS) project in its latest report. Contrary to popular belief, technical problems were among the least cited challenges to data exchange.

In total, the authors have identified eleven obstacles. The authors of the report also make recommendations to the European Commission and EU member states on how these obstacles can be removed. This, they say, is the only way to ensure the successful functioning of the future European Health Data Area. The project involves 25 European countries, including 21 EU countries. The goal is to develop European principles for the secondary use of health data.

System differences

One fundamental obstacle is the differences in governance and the handling of health data in Europe. To date, TEHDAS has analyzed corresponding systems in ten European countries, including Austria, Estonia, Finland, and Greece. Two more are to be added by the end of 2022.

The aim of the project is to research the status quo in the handling of health data in the member states. This is intended to support the EU Commission in developing legislation for the European Health Data Space (EHDS).

Different interpretation of the GDPR

One of the biggest challenges, for example, is a different interpretation of the General Data Protection Regulation (GDPR). However, the authors emphasize that this is not just about the GDPR itself, but about national legislation that applies in addition to the GDPR. Overlapping legal acts and regulations on the use of health and research data at the EU and national levels have created differences in data use across Europe, they say. This makes access to certain types of data, such as genomic data, more difficult and encourages risk-averse behavior.

When cross-border processing takes place and partners in a research consortium jointly process the data, the different national legislations would have to be applied simultaneously, the authors further explain. This leads to different requirements for processing, which hinders joint research projects.

In addition, there is no common European understanding of key terms such as data anonymization and pseudonymization, the report says. As a result, the methods for anonymization vary considerably between regional, national, and European authorities. This, in turn, leads to interoperability problems. Also, EU countries define what constitutes “sufficient anonymization” quite differently. The authors point out that too much anonymization can affect data quality, usability, and reliability. Similar problems exist with pseudonymization, according to the report.

Recommendation for EU and national level

To address these barriers, TEHDAS has developed a number of policy options for the European Commission and member states. For example, the Commission could propose legislation to clearly define secondary uses of health data and set rules for their collection, use, and sharing. Similarly, it would be possible to define key concepts such as anonymization and pseudonymization at the EU level for the European Health Data Space. Another option would be a common reference document that captures the anonymization practices of the member states and clearly sets out the national rules and interpretations of the countries.

With regard to additional national data protection regulations, the EU Commission should encourage member states to harmonize or amend national legislation in order to eliminate conflicts between different legal acts. Also, a platform could help at the EU level where ethics committees, data protection commissioners, and data protection licensing bodies share experiences across Europe. According to TEHDAS, the report is based on literature research, stakeholder case studies, and expert interviews. ank

Network block against porn portal

Germany’s largest retail providers are to block the porn portal xHamster with immediate effect. The Cyprus-based company had refused to implement German youth protection laws. Other portals could follow.

Over the past two years, the Media Authority of North Rhine-Westphalia (Landesanstalt für Medien NRW), on behalf of the Commission for the Protection of Minors in the Media (Kommission für Jugendmedienschutz), had waged a campaign against companies that did not comply with German youth protection laws. The authorities had proved largely powerless over the past decade: Germany’s sophisticated youth protection systems ensured that the German market for online pornography dried up almost completely, while access to pornography became increasingly easy. International portals such as YouPorn and xHamster experienced enormous growth. Officially, many of these offerings are headquartered in Cyprus. Who is actually behind the corporate networks is often unclear.

The director of the NRW state media authority, Tobias Schmidt, is counting on getting the biggest porn portals to relent in order to change the market dynamics. Before the various state media authorities could send out the blocking orders, they first had to go through a lengthy process: First, a state media authority had to ask the media regulator of EU member Cyprus, through the Ministry of Foreign Affairs, for permission to officially write to the companies. Only then could they ask the companies to install an age verification system accepted under German regulations.

Defeat in court

The next step was for the authorities to identify the relevant hosting provider in order to claim it as the “interfering party”. Only in fourth place came the blocking order, which was now sent to the end customer providers by the relevant state authorities. The order for this came from the Commission for the Protection of Minors in the Media.

While the first letters remained unanswered, the prospect of imminent blocking prompted a reaction: Pornhub, YouPorn, and Mydirtyhobby went to the Düsseldorf Administrative Court in 2021, but were defeated in summary proceedings at first instance. According to xHamster, it learned of the plans too late to take legal action against the decision. That’s why the authorities were able to initiate the blocking before the Higher Administrative Court in Münster had reviewed the proceedings.

The legal dispute revolves around several paradigms of regulation: the German media regulator argues that the offerings are aimed at German audiences because they are delivered in German. Thus, the providers are bound by German youth protection law. The website operators, on the other hand, argue that they are already doing enough to protect minors, as they label their offerings in such a way that they can be automatically filtered out by youth protection software. They argue that it is not their responsibility to stop children from viewing, but rather their legal guardians. The Düsseldorf Administrative Court almost completely agreed with the legal opinion of the authorities here.

Precedent set

According to the State Media Authority, the blocking orders are effective immediately. However, several providers told Europe.Table that they wanted to review such an order first before implementing it. In the past, several providers in North Rhine-Westphalia had failed to take legal action to stop an initial blocking order issued in 2002 by the then responsible media regulator at the Düsseldorf district government. Nevertheless, German authorities did not resort to the controversial means of network blocking for almost 20 years, although it was desired by many politicians, especially in the case of the online gambling industry.

The new procedures set a precedent for how national authorities can enforce their own legislation even within the European Union. Other European countries are also showing interest. For example, the French media regulator has also threatened several porn portals with a block and, according to a report in “Le Figaro,” has thus persuaded at least one provider to install an age verification system for French users. The British government is planning similar obligations, but had failed in its first attempt. An overarching European system for age verification and law enforcement does not yet exist.

The case could also breathe new life into federal media supervision in Germany. The state media authorities, for example, are on the lookout for new tasks as a result of the removal of many restrictions on linear broadcasting. Their non-governmental organization has already put them on the map as a suitable regulator for the Digital Services Act. The tool of network blocking also takes on new weight before the current ban on Russian state media. tmk

ECJ opinion: environmentalists may file lawsuit against thermal windows

An ECJ opinion backs Deutsche Umwelthilfe in its fight against potentially banned defeat devices in cars. The responsible Advocate General at the European Court of Justice, Athanasios Rantos, argued on Thursday that a recognized environmental organization may challenge an administrative decision in court that may violate the ban on defeat devices. The opinion is not legally binding, and a ruling by the ECJ is expected in several weeks.

The background is a dispute before the Schleswig Administrative Court. DUH is taking legal action against a decision by the Federal Motor Transport Authority, which approved so-called thermal windows for VW cars. The Administrative Court had doubted that DUH had the right to sue, since the decision did not itself violate its rights.

Thermal windows are software that allow increased emissions of pollutants at certain outside temperatures. Car manufacturers argue that this is necessary to protect the engine. Environmental organizations, on the other hand, see it as a tool that helps make pollutant emissions from cars appear smaller under test conditions than they actually are in real-world road traffic. Advocate General Rantos recommended to the ECJ in December that thermal windows be classified as illegal (Europe.Table reported). dpa

Advertising on platforms: we need to talk about money

Martin Andree

The fact that Meta and Alphabet succeeded in overturning the obligation to report criminal content from the Network Enforcement Act (NetzDG) is a setback for lawmakers, even if central aspects in the Digital Services Act will hopefully still be implemented at European level in the future. The decision of the Cologne Administrative Court shows once again that digital corporations continue to successfully play cat and mouse with overburdened authorities. The different legal responsibilities (including the EU, the federal government, and the states) and the confusion of existing law make it easy for digital corporations to use such dodges to avoid urgently needed regulation.

They are thus gaining more and more time in their successfully advancing takeover of our media system. The year 2021 marks an epochal threshold here – because, for the first time, more investment was made in advertising in digital media than in all other analog media combined. This measure provides an excellent indicator of the total audience attention available – because advertisers prefer to invest where users consume content.

The platforms will therefore be allowed to continue to grow largely unregulated in the future, whereas the analog media will increasingly erode. Since 2021 at the latest, digital media have been the leading media. However, the legislative perspective of the NetzDG, the Telemedia Act, but also the Digital Markets Act, and the Digital Services Act are not at this level in terms of content. Such initiatives attempt to remedy deficiencies in retrospect, which were already wrongly saddled in the legal foundations when the platforms enjoyed puppy protection and their business models were not yet taken seriously – which is why they have a unique liability privilege.

Currently, the legislator allows platforms to operate on the basis of a business principle in which they are allowed to offer a “program” of punishable content (for example, false statements of fact, defamation, incitement to hatred, incitement to commit a crime, defamation, defamatory criticism, Holocaust denial, etc.) unchallenged.

Massive unequal treatment

To illustrate with a recent example: if podcaster Joe Rogan offers his content on Spotify, the platform is not responsible (no matter how many millions it pays in royalties or how many profits it makes from the content). If Joe Rogan were to offer the same content on RTL, for example, RTL would have to assume full distributor liability. First, this is a massive inequality of treatment between media companies that are in direct competition with each other. At the same time, it is inconsistent for a platform to assume economic responsibility for content (through fees or advertising, for example) even though it denies responsibility for the same content. This is actually so irrational that it has to be spelled out for once:

1. We enable platforms’ business models that monetize criminal content.

2. This results in massive social problems (such as the current high number of vaccination opponents with massive economic damage to society); these are problems that arise causally from the platforms’ business model.

3. We allow platforms to generate billions in profits from a “program” with criminal content through advertising or fees.

4. In contrast, we turn the social problems of the platforms into our own problems after the fact, for example when authorities demand mandatory reporting of criminal acts in the NetzDG.

5. The digital companies are avoiding this (on the grounds that they are based in Ireland and there is no obligation to report hate postings there).

This will only change if we reject the systematic exploitation of regulatory loopholes by digital corporations – and make the emerging social problems the platforms’ problems as well. This is precisely what will only happen when we have the political courage to question the liability privilege in connection with monetization.

Therefore, the currently prevailing unequal jurisdiction should be stopped, which, ironically, also actively punishes the analog media of press or broadcasting for checking the published information according to the common journalistic criteria and standards. The flourishing digital corporations check nothing and are additionally exempted from liability (with the exception of something like the new copyright directive).

“Facebook unfiltered”

Instead, any form of monetization through advertising should be seen as a clear signal that a company has “taken ownership” of the content used (this idea is thus in conflict with the current Telemedia Act, § 10). To put it directly: Whoever assumes economic responsibility would necessarily also have to bear responsibility for the content.

All platforms are free to introduce additional alternative offerings or feeds on their platforms that do not involve any liability for dissemination (let’s call it a playful example: “Facebook / YouTube unfiltered”). However, in such a “program” or feed, there may then also be no economic monetization through advertising. In this way, it remains open to every user to freely (and “unfiltered”) express opinions on such platform offerings.

This possibility enables us to reject the platforms’ reflexive references to “freedom of opinion” – especially since the digital corporations have long been in bad company here. For reasons that are easy to see through, many new platforms that disseminate radical right-wing positions cast themselves as champions against “censorship” and guardians of the grail of “freedom of speech” – such as Parler, Gettr, gab, MeWe, Telegram, or Trump’s Truth Social.

It is obviously one thing to enable the free expression of opinions. But it is quite another thing to then earn money with this (in case of doubt illegal) content and to additionally take the severely damaged society hostage in the name of freedom of expression.

Indeed, the closer one gets to this phenomenon of monetization, the more difficult it becomes to draw a clear dividing line beyond which responsibility for distribution of illegal content would be meaningfully suspended. If Spotify pays a podcaster like Joe Rogan $100 million for content, there is a strong case to be made that Spotify has “owned” that content and consequently should be liable like a television broadcaster. Ethically, that is so, but legally it is not.

Platforms must take responsibility

What about a prominent YouTuber who receives payments from YouTube that distribute shares of the advertising revenue generated for the creator? Here, too, YouTube pays the creator for the content. Isn’t YouTube then also responsible for the content?

The situation is different again with Facebook or Instagram – but here, too, the platform monetizes all transmitted content through advertising. Can it really be argued that the company has not “made this content its own”?

So there is something to be said for including the aspect of monetarization in the debate – because it helps break the current stalemate in an ideologically deadlocked debate (control versus freedom). This is precisely what could create new options for constructive solutions. For example, it would easily be possible to evaluate specific and defined forms of monetization as a clear signal that a company has “made its own” the content used.

Such rules with defined thresholds and limits could unleash a new and innovative dynamic on the social media market. The platforms would finally be forced to “grow up” in line with their current market position and take responsibility. Because this nasty problem is now really their problem for the first time, we can assume that they themselves will swiftly propose constructive solutions and quickly demonstrate their much-lauded innovative strength.

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