Following the EU Commission’s controversial decision to include gas and nuclear power in the taxonomy and thus classify them as green, the debate now turns to mining. It is said, in order to prevent potential supply problems, European mining projects would need to be subsidized. But environmental groups are skeptical, writes Leonie Düngefeld.
It will be a close vote today in the EU Parliament. MEPs will decide on important elements of the Fit-for-55 package, including a possible de facto ban on internal combustion engines by 2035. No clear compromises have yet emerged on the dossiers concerning ETS, CBAM, and the fleet limits. The votes of the Renew MEPs will likely be decisive here, analyzes Lukas Scheid.
In contrast, agreements were reached yesterday between the member states and the EU Parliament on no less than three other important issues: In 2024, for example, there will be an end to cable clutter, and the USB-C charging socket will become standard. There was also a compromise on minimum wages in the EU and, last but not least, on the gender quota in management positions of listed companies.
The global economy is in turmoil, and the 12th Ministerial Conference of the World Trade Organization, which starts in Geneva on Sunday, faces a mammoth task. Not only must it find answers to the current crises, it also has to figure out how to make itself fit for the future, writes Stormy-Annika Mildner, Director of the Aspen Institute Germany in today’s guest article.
Before a vote in the plenary of the EU Parliament, the positions of the various parties and groups are usually well known. The actual negotiations have already taken place in the run-up to the previous vote in the committees, so compromise lines have often already been found before a dossier reaches the plenary. But exceptions prove the rule, as we all know, and that is why things can turn out quite differently when it comes to particularly controversial issues. Some legislative proposals in the Fit-for-55 package fall in this category.
And so the Dutch Social Democrat and CBAM rapporteur Mohammed Chahim warned during the parliamentary debate on the climate package yesterday that there was still one day left to compromise. That means there is still a struggle to find common positions. Chahim’s hard-won compromise in the Environment Committee (ENVI) to fully introduce the carbon border adjustment mechanism as carbon leakage protection as early as 2030 and to end free CO2 allowances (Europe.Table reported) is facing defeat.
It lacks a majority because the EPP favors the ITRE compromise, which envisages ending free allocations in 2034. Renew MEPs in the ENVI also grudgingly approved the Chahim report. In the plenum, their approval was considered almost utopian from the very beginning. And some S&D members also consider 2030 as the end date for free industry allowances to be too early.
That is why another third proposal is also up for vote, combining the two positions. S&D and Renew agreed on the year 2032 (Europe.Table reported). This compromise will be largely supported by the Greens in the EU Parliament. True to the motto: If we don’t get 2030, we’d rather take 2032 instead of 2034. Whether this position can win a majority also depends on whether the Left and the French Greens support it or insist on 2030. Their positions are still open.
The export regulation in the CBAM is another open question. Many industry representatives continue to express great concern that eco-friendly goods produced in Europe will no longer be competitive on the global market. S&D and Greens support a proposal that would continue to provide free CO2 allowances for sustainably produced export goods. This is controversial among EPP and Renew MEPs, as so far there are no clear provisions on how to verify what has been produced sustainably and is intended for export and what is not.
The reform of the European Emissions Trading System has provided plenty of material for discussion since the Commission presented its proposal last July – and it still does today. To speed up the reduction impact of the ETS and raise the ambition of European climate policy, the Commission proposed a one-time withdrawal of around 110 million allowances in 2024. The EPP fears that this could lead to a sudden price spike in the ETS and cause disruptive market developments. Their alternative: Only 70 million allowances would initially be withdrawn from the market in 2024, with another 50 million in 2026 to prevent major price shocks. This idea was well received by the Renew Group, even though it had supported the much more ambitious one-time withdrawal of over 200 million CO2 allowances in the ENVI.
In the spirit of compromise, the Greens and Social Democrats have now returned to the Commission’s initial proposal and hope to win back the Renew MEPs this way. Sources in the Parliament have told Europe.Table that at least part of the Renew parliamentary group is not opposed to accepting this compromise. How large this faction is will ultimately decide whose amendment receives the majority.
The situation is similar for CO2 emissions standards for passenger cars and light commercial vehicles. Although the ENVI report was drafted by Renew politician Jan Huitema, the proposal for more ambitious interim targets did not receive a majority due to a lack of votes from his own party. Instead, two Renew MEPs (including FDP member Andreas Glück) voted in favor of EPP amendments. These do not propose an end to internal combustion vehicles by 2035, but an emission standard of 90 percent to keep an option for the use of e-fuels.
However, there are no new compromises here. Therefore, there will be an extremely close vote between the EPP proposal and the Commission proposal (combustion engine phase-out in 2035). Once again, the decision of the Renew MEPs will be decisive. At a press event last week, Huitema assured Europe.Table that his group was united. If this is the case, it will probably come down to a majority in favor of the Commission’s proposal.
With great effort, European mining companies are currently trying to shake off their image as a dirty industry. This is also in the interest of politicians. After all, Europe wants to become less dependent on other raw material exporters. Therefore, the European Commission wants to prepare a legislative initiative that, among other things, includes mining and refining projects in the taxonomy. This would mean: These projects are considered sustainable and investments are directed to this sector.
Many see this as the only way to secure supplies of critical raw materials. “Not including European mining projects in the taxonomy would mean standstill,” said Philippe Varin, Head of the French government mission on critical materials. The Russian war in Ukraine would raise concerns about supplies of key metals such as titanium, palladium, nickel and neon. There are also repeated supply delays for Chinese imports.
The Platform on Sustainable Finance (PSF), which advises the Commission on the ongoing development of the taxonomy, is currently beginning to develop technical review criteria for mining and refining. It plans to present these to the Commission in September. This was originally planned for June, but consensus has not yet been reached due to a lack of data on mining activities, explains Marzia Traverso, rapporteur for the PSF’s technical working group. Mining will likely be included in the taxonomy, but it is not yet certain in which of the pending delegated acts.
The European Federation of Geologists (EFG) already called last year for the adoption of the EU’s taxonomy for environmentally and socially responsible mining activities: Europe has proven potential for resource development – but the region is not considered investment-friendly by the industry, according to a position paper by the NGO. The EU would have to change this perception.
Excluding mining projects from the taxonomy could lead to a decrease in investment in sustainable mining in Europe. “This would then benefit less sustainable production in other parts of the world,” said a spokeswoman for the Swedish mining association SveMin, adding that the Swedish mining industry has invested billions in recent years to switch to fossil-free and sustainable production of raw materials. It wants to become a pioneer in sustainable mining, for example with the large-scale project Mining with Nature: By 2030, companies are to increase biodiversity – in all of their operating regions.
“It’s remarkable that this is happening now that the taxonomy is being devised,” says Diego Marin of the European Environmental Bureau (EEB). “However, voluntary efforts will never come close to mandatory regulations.” Current data would indicate that there is little evidence of responsible mining at this time. In theory, taxonomy could be a tool to push the mining industry to behave in a less ecologically damaging and more responsible way, Marin says. In the end, however, the devil is in the details.
The Responsible Mining Foundation (RFM) defines responsible mining as “mining that demonstrably respects and protects the interests of peoples and the environment and contributes discernibly and fairly to broad economic development of the producing country.” Every two years, the RFM publishes the Responsible Mining Index, in which it evaluates mining projects around the world for their performance on environmental, social and governance (ESG) principles. The results show: Little progress has been made in recent years on most climate-related impacts of mining. Only individual companies had improved.
Most progress has been made in fighting bribery and corruption, on human rights, responsible sourcing, and disclosure of government payments. “This can be attributed, at least in part, to external factors, as the issues have been incorporated into legislation, requirements and/or reporting frameworks,” explains Pierre de Pasquale of the Responsible Mining Foundation.
This is why the RMF supports the inclusion of mining in the taxonomy. However, it sees a risk of carbon-washing should the rebranding of mining companies as green and sustainable remain backed only by past climate action, Pierre de Pasquale explains – if companies’ climate action ends at low-carbon on-site production and ignores other pressing climate-related impacts. Companies, financiers, insurers and governments must therefore ensure that the climate-related impacts of mining are recognized and addressed, de Pasquale argues.
The outlook for the global economy is anything but rosy. The world faces a threefold crisis: an energy price crisis, a food crisis, and a financial crisis. This threefold crisis comes on top of the health crisis and climate crisis. They all amplify each other. The World Bank expects energy prices to increase by more than 50 percent in 2022. The Food Price Index by the Food and Agriculture Organization (FAO) reached its all-time peak in March 2022. Prices of fertilizer have jumped nearly 30 percent since the start of 2022, following an 80 percent increase last year.
Particularly affected are poor countries and the lower-income groups. Even before Russia’s attack on Ukraine, the number of people facing hunger around the world had been steadily rising due to climate change, wars, and the aftermath of the Covid pandemic. Now, the World Food Program warns of a new famine. Many countries that have been particularly affected by the Covid-19 pandemic have little room for fiscal support measures. Due to the high inflation, many central banks must step on the monetary policy brakes. This will further dampen economic prospects.
The WTO has significantly revised its global trade growth forecast for 2022 down from 4.7 percent to 3 percent. In addition to Russia’s war on Ukraine, Covid lockdowns in China, bottlenecks in container shipping particularly, high shipping costs, and a labor shortage are doing their part to slow down global trade. In addition, as was the case at the beginning of the Covid-19 pandemic, another problem emerges: Since the Russian invasion of Ukraine, the number of countries imposing export restrictions on food has increased from 3 to 16 (April 2022).
The total export volume affected by the restrictions is equivalent to about 17 of the total calories traded worldwide. Countries that have imposed export restrictions include Russia (wheat), Indonesia (palm oil), Argentina (beef), Turkey, Kyrgyzstan, and Kazakhstan (cereals). In mid-May, India banned wheat exports after prices soared and a heat wave damaged crops.
Another trend has emerged that could significantly impact global trade in the medium- to long-term. Recent events have painfully shown Western countries how problematic high, one-sided dependencies on critical commodities can be. Hegemonic policies, rivalry of ideas and systems, cold and hot conflicts, as well as wars threaten to divide the world into new blocs – large autocracies on the one side and liberal democracies on the other.
Trade increasingly falls under the umbrella of security: As a source of potential national vulnerabilities on the one hand, and as a strategic instrument of coercion on the other. This will massively affect trade flows and expedite the re-regionalization and re-nationalization of value chains.
More than ever, a strong WTO is needed to guide countries through these difficult times. However, the multilateral organization finds itself in the worst crisis since its inception. All three pillars of the organization – 1. trade liberalization and rule-making, 2. trade policy monitoring, and 3. dispute settlement – all face major challenges. The appetite for new market access has been low for years. Moreover, the WTO rulebook is no longer fit for 21st-century trade. It has little to offer in terms of digital trade and fails to properly deal with industrial subsidies.
The WTO rulebook also has weaknesses when it comes to labor and environmental issues. Particularly problematic: Since the end of 2019, the organization’s dispute settlement mechanism is dysfunctional. The United States continues to block the appointment of new Appellate Body (AB) members. Without a functioning Appellate Body, contested panel decisions end up in limbo. Enforcement of WTO obligations is thus delayed indefinitely which, consequently, significantly impairs the effectiveness of the WTO.
So, what does this mean for the upcoming Ministerial Conference? WTO members must address both short-term and long-term challenges. They should jointly oppose export restrictions on food and medical products. Furthermore, they should finally agree on a compromise on fisheries subsidies. Failure to reach an agreement would not only be problematic from an environmental perspective, but would also further undermine the credibility of the WTO.
Progress must also be made on the issue of trade and health. A particularly critical issue here is patent protection for Covid vaccines. Where joint approaches by all 164 members are impossible, plurilateral initiatives such as those on digital trade offer an opportunity to modernize the rulebook, at least in part. Major reform decisions are certainly not to be expected. At the very least, however, WTO members should agree on a reform roadmap till the next Ministerial Conference.
None of this will be easy, since consensus is required for all decisions. Not only are the negotiations complicated by the fact that Russia is still at the negotiating table. The major trading nations are anything but united on many issues. But if WTO members continue to stand idly by or actively block reforms, the organization will continue to lose influence. This will lead to a great risk that instead of the rule of law, power will rule international trade in the future – and that would be to everyone’s disadvantage.
Following the EU Commission’s controversial decision to include gas and nuclear power in the taxonomy and thus classify them as green, the debate now turns to mining. It is said, in order to prevent potential supply problems, European mining projects would need to be subsidized. But environmental groups are skeptical, writes Leonie Düngefeld.
It will be a close vote today in the EU Parliament. MEPs will decide on important elements of the Fit-for-55 package, including a possible de facto ban on internal combustion engines by 2035. No clear compromises have yet emerged on the dossiers concerning ETS, CBAM, and the fleet limits. The votes of the Renew MEPs will likely be decisive here, analyzes Lukas Scheid.
In contrast, agreements were reached yesterday between the member states and the EU Parliament on no less than three other important issues: In 2024, for example, there will be an end to cable clutter, and the USB-C charging socket will become standard. There was also a compromise on minimum wages in the EU and, last but not least, on the gender quota in management positions of listed companies.
The global economy is in turmoil, and the 12th Ministerial Conference of the World Trade Organization, which starts in Geneva on Sunday, faces a mammoth task. Not only must it find answers to the current crises, it also has to figure out how to make itself fit for the future, writes Stormy-Annika Mildner, Director of the Aspen Institute Germany in today’s guest article.
Before a vote in the plenary of the EU Parliament, the positions of the various parties and groups are usually well known. The actual negotiations have already taken place in the run-up to the previous vote in the committees, so compromise lines have often already been found before a dossier reaches the plenary. But exceptions prove the rule, as we all know, and that is why things can turn out quite differently when it comes to particularly controversial issues. Some legislative proposals in the Fit-for-55 package fall in this category.
And so the Dutch Social Democrat and CBAM rapporteur Mohammed Chahim warned during the parliamentary debate on the climate package yesterday that there was still one day left to compromise. That means there is still a struggle to find common positions. Chahim’s hard-won compromise in the Environment Committee (ENVI) to fully introduce the carbon border adjustment mechanism as carbon leakage protection as early as 2030 and to end free CO2 allowances (Europe.Table reported) is facing defeat.
It lacks a majority because the EPP favors the ITRE compromise, which envisages ending free allocations in 2034. Renew MEPs in the ENVI also grudgingly approved the Chahim report. In the plenum, their approval was considered almost utopian from the very beginning. And some S&D members also consider 2030 as the end date for free industry allowances to be too early.
That is why another third proposal is also up for vote, combining the two positions. S&D and Renew agreed on the year 2032 (Europe.Table reported). This compromise will be largely supported by the Greens in the EU Parliament. True to the motto: If we don’t get 2030, we’d rather take 2032 instead of 2034. Whether this position can win a majority also depends on whether the Left and the French Greens support it or insist on 2030. Their positions are still open.
The export regulation in the CBAM is another open question. Many industry representatives continue to express great concern that eco-friendly goods produced in Europe will no longer be competitive on the global market. S&D and Greens support a proposal that would continue to provide free CO2 allowances for sustainably produced export goods. This is controversial among EPP and Renew MEPs, as so far there are no clear provisions on how to verify what has been produced sustainably and is intended for export and what is not.
The reform of the European Emissions Trading System has provided plenty of material for discussion since the Commission presented its proposal last July – and it still does today. To speed up the reduction impact of the ETS and raise the ambition of European climate policy, the Commission proposed a one-time withdrawal of around 110 million allowances in 2024. The EPP fears that this could lead to a sudden price spike in the ETS and cause disruptive market developments. Their alternative: Only 70 million allowances would initially be withdrawn from the market in 2024, with another 50 million in 2026 to prevent major price shocks. This idea was well received by the Renew Group, even though it had supported the much more ambitious one-time withdrawal of over 200 million CO2 allowances in the ENVI.
In the spirit of compromise, the Greens and Social Democrats have now returned to the Commission’s initial proposal and hope to win back the Renew MEPs this way. Sources in the Parliament have told Europe.Table that at least part of the Renew parliamentary group is not opposed to accepting this compromise. How large this faction is will ultimately decide whose amendment receives the majority.
The situation is similar for CO2 emissions standards for passenger cars and light commercial vehicles. Although the ENVI report was drafted by Renew politician Jan Huitema, the proposal for more ambitious interim targets did not receive a majority due to a lack of votes from his own party. Instead, two Renew MEPs (including FDP member Andreas Glück) voted in favor of EPP amendments. These do not propose an end to internal combustion vehicles by 2035, but an emission standard of 90 percent to keep an option for the use of e-fuels.
However, there are no new compromises here. Therefore, there will be an extremely close vote between the EPP proposal and the Commission proposal (combustion engine phase-out in 2035). Once again, the decision of the Renew MEPs will be decisive. At a press event last week, Huitema assured Europe.Table that his group was united. If this is the case, it will probably come down to a majority in favor of the Commission’s proposal.
With great effort, European mining companies are currently trying to shake off their image as a dirty industry. This is also in the interest of politicians. After all, Europe wants to become less dependent on other raw material exporters. Therefore, the European Commission wants to prepare a legislative initiative that, among other things, includes mining and refining projects in the taxonomy. This would mean: These projects are considered sustainable and investments are directed to this sector.
Many see this as the only way to secure supplies of critical raw materials. “Not including European mining projects in the taxonomy would mean standstill,” said Philippe Varin, Head of the French government mission on critical materials. The Russian war in Ukraine would raise concerns about supplies of key metals such as titanium, palladium, nickel and neon. There are also repeated supply delays for Chinese imports.
The Platform on Sustainable Finance (PSF), which advises the Commission on the ongoing development of the taxonomy, is currently beginning to develop technical review criteria for mining and refining. It plans to present these to the Commission in September. This was originally planned for June, but consensus has not yet been reached due to a lack of data on mining activities, explains Marzia Traverso, rapporteur for the PSF’s technical working group. Mining will likely be included in the taxonomy, but it is not yet certain in which of the pending delegated acts.
The European Federation of Geologists (EFG) already called last year for the adoption of the EU’s taxonomy for environmentally and socially responsible mining activities: Europe has proven potential for resource development – but the region is not considered investment-friendly by the industry, according to a position paper by the NGO. The EU would have to change this perception.
Excluding mining projects from the taxonomy could lead to a decrease in investment in sustainable mining in Europe. “This would then benefit less sustainable production in other parts of the world,” said a spokeswoman for the Swedish mining association SveMin, adding that the Swedish mining industry has invested billions in recent years to switch to fossil-free and sustainable production of raw materials. It wants to become a pioneer in sustainable mining, for example with the large-scale project Mining with Nature: By 2030, companies are to increase biodiversity – in all of their operating regions.
“It’s remarkable that this is happening now that the taxonomy is being devised,” says Diego Marin of the European Environmental Bureau (EEB). “However, voluntary efforts will never come close to mandatory regulations.” Current data would indicate that there is little evidence of responsible mining at this time. In theory, taxonomy could be a tool to push the mining industry to behave in a less ecologically damaging and more responsible way, Marin says. In the end, however, the devil is in the details.
The Responsible Mining Foundation (RFM) defines responsible mining as “mining that demonstrably respects and protects the interests of peoples and the environment and contributes discernibly and fairly to broad economic development of the producing country.” Every two years, the RFM publishes the Responsible Mining Index, in which it evaluates mining projects around the world for their performance on environmental, social and governance (ESG) principles. The results show: Little progress has been made in recent years on most climate-related impacts of mining. Only individual companies had improved.
Most progress has been made in fighting bribery and corruption, on human rights, responsible sourcing, and disclosure of government payments. “This can be attributed, at least in part, to external factors, as the issues have been incorporated into legislation, requirements and/or reporting frameworks,” explains Pierre de Pasquale of the Responsible Mining Foundation.
This is why the RMF supports the inclusion of mining in the taxonomy. However, it sees a risk of carbon-washing should the rebranding of mining companies as green and sustainable remain backed only by past climate action, Pierre de Pasquale explains – if companies’ climate action ends at low-carbon on-site production and ignores other pressing climate-related impacts. Companies, financiers, insurers and governments must therefore ensure that the climate-related impacts of mining are recognized and addressed, de Pasquale argues.
The outlook for the global economy is anything but rosy. The world faces a threefold crisis: an energy price crisis, a food crisis, and a financial crisis. This threefold crisis comes on top of the health crisis and climate crisis. They all amplify each other. The World Bank expects energy prices to increase by more than 50 percent in 2022. The Food Price Index by the Food and Agriculture Organization (FAO) reached its all-time peak in March 2022. Prices of fertilizer have jumped nearly 30 percent since the start of 2022, following an 80 percent increase last year.
Particularly affected are poor countries and the lower-income groups. Even before Russia’s attack on Ukraine, the number of people facing hunger around the world had been steadily rising due to climate change, wars, and the aftermath of the Covid pandemic. Now, the World Food Program warns of a new famine. Many countries that have been particularly affected by the Covid-19 pandemic have little room for fiscal support measures. Due to the high inflation, many central banks must step on the monetary policy brakes. This will further dampen economic prospects.
The WTO has significantly revised its global trade growth forecast for 2022 down from 4.7 percent to 3 percent. In addition to Russia’s war on Ukraine, Covid lockdowns in China, bottlenecks in container shipping particularly, high shipping costs, and a labor shortage are doing their part to slow down global trade. In addition, as was the case at the beginning of the Covid-19 pandemic, another problem emerges: Since the Russian invasion of Ukraine, the number of countries imposing export restrictions on food has increased from 3 to 16 (April 2022).
The total export volume affected by the restrictions is equivalent to about 17 of the total calories traded worldwide. Countries that have imposed export restrictions include Russia (wheat), Indonesia (palm oil), Argentina (beef), Turkey, Kyrgyzstan, and Kazakhstan (cereals). In mid-May, India banned wheat exports after prices soared and a heat wave damaged crops.
Another trend has emerged that could significantly impact global trade in the medium- to long-term. Recent events have painfully shown Western countries how problematic high, one-sided dependencies on critical commodities can be. Hegemonic policies, rivalry of ideas and systems, cold and hot conflicts, as well as wars threaten to divide the world into new blocs – large autocracies on the one side and liberal democracies on the other.
Trade increasingly falls under the umbrella of security: As a source of potential national vulnerabilities on the one hand, and as a strategic instrument of coercion on the other. This will massively affect trade flows and expedite the re-regionalization and re-nationalization of value chains.
More than ever, a strong WTO is needed to guide countries through these difficult times. However, the multilateral organization finds itself in the worst crisis since its inception. All three pillars of the organization – 1. trade liberalization and rule-making, 2. trade policy monitoring, and 3. dispute settlement – all face major challenges. The appetite for new market access has been low for years. Moreover, the WTO rulebook is no longer fit for 21st-century trade. It has little to offer in terms of digital trade and fails to properly deal with industrial subsidies.
The WTO rulebook also has weaknesses when it comes to labor and environmental issues. Particularly problematic: Since the end of 2019, the organization’s dispute settlement mechanism is dysfunctional. The United States continues to block the appointment of new Appellate Body (AB) members. Without a functioning Appellate Body, contested panel decisions end up in limbo. Enforcement of WTO obligations is thus delayed indefinitely which, consequently, significantly impairs the effectiveness of the WTO.
So, what does this mean for the upcoming Ministerial Conference? WTO members must address both short-term and long-term challenges. They should jointly oppose export restrictions on food and medical products. Furthermore, they should finally agree on a compromise on fisheries subsidies. Failure to reach an agreement would not only be problematic from an environmental perspective, but would also further undermine the credibility of the WTO.
Progress must also be made on the issue of trade and health. A particularly critical issue here is patent protection for Covid vaccines. Where joint approaches by all 164 members are impossible, plurilateral initiatives such as those on digital trade offer an opportunity to modernize the rulebook, at least in part. Major reform decisions are certainly not to be expected. At the very least, however, WTO members should agree on a reform roadmap till the next Ministerial Conference.
None of this will be easy, since consensus is required for all decisions. Not only are the negotiations complicated by the fact that Russia is still at the negotiating table. The major trading nations are anything but united on many issues. But if WTO members continue to stand idly by or actively block reforms, the organization will continue to lose influence. This will lead to a great risk that instead of the rule of law, power will rule international trade in the future – and that would be to everyone’s disadvantage.
