Food crisis + EU defense + Europe Day + • Table.Briefings

Dear reader,

The Conference on the Future of Europe ended yesterday. 800 EU citizens drafted 49 proposals for a better Europe. The next step is now to implement these proposals, “either by using the full limits of what we can do within the Treaties, or, yes, by changing the Treaties if need be,” said Commission President Ursula von der Leyen at the ceremony.

Meanwhile, the EU continues to prepare a full-scale oil embargo against Russia. Von der Leyen traveled to Hungary on Monday to “clarify issues related to sanctions and energy security” with Viktor Orbán.

To prevent a potential food shortage caused by the war in Ukraine, the EU Commission allows exceptions to the regulations on fallow land. Almost all EU countries want to use their fallow land for agriculture again, at least temporarily. Germany, however, is – once again – choosing a different path. Timo Landenberger explains the reasons in his analysis.

Where should the money that the EU wants to put into its defense come from? Next week, the Commission will present its analysis of both funding and investment gaps. In particular, joint projects between countries are to be promoted, because so far an inefficient distribution of resources has hindered the development of a European defense, according to Italy’s Prime Minister Mario Draghi. Ella Joyner provides the background.

Ensuring that the introduction of the second, EU-wide emissions trading scheme is socially sustainable is not only necessary, but also possible, especially through a “regressive” CO2 price, write Martin Menner and Goetz Reichert of the Centre for European Policy Studies in today’s opinion piece. The lower the burden on citizens, the higher the acceptance of ETS 2 will be.

Your
Lisa-Martina Klein

Food crisis: Germany’s special path in agricultural policy

By

Timo Landenberger

The number of people experiencing acute famine around the world rose by more than a quarter last year. This is according to a report by the Global Network Against Food Crises, which was founded in 2016 by the EU, the UN Food and Agriculture Organization (FAO) and the World Food Program WFP. According to the Global Report on Food Crises, released Wednesday, about 193 million people in 53 countries did not have enough to eat in 2021, 40 million more than in the previous record year of 2020.

This precarious situation will be considerably exacerbated by the Ukraine crisis, according to the report. Like Russia, the country is one of the world’s biggest grain exporters. Numerous African countries depend on its exports. Egypt, the continent’s third-largest country by population, buys more than 80 percent of its wheat and corn from Russia and Ukraine, according to UN data, and Somalia even 100 percent.

But now, exports could fail completely. Moscow has imposed an export ban on grain. And agriculture in Ukraine is largely at a standstill due to the war. To this end, around 4.5 million tons of urgently needed grain are currently blocked in Ukrainian ports, the WFP reported a few days ago. This is because almost all food exports from the country are shipped by sea, but this route is blocked due to the war.

Food prices at an all-time high

In addition, food shortages and the dramatic increase in production costs caused by the energy price crisis continue to drive inflation. The FAO Food Price Index rose between February and March by the highest value ever recorded and is at an all-time high, explains Alexander Mueller, Managing Director of the TMG Think Tank for Sustainability and former FAO Deputy Director. This is also being felt particularly by importing countries in Africa, where up to 80 percent of household income is spent on food, Mueller said. The extent of the food crisis cannot yet be predicted. However, if no extensive countermeasures are taken, “it will end very badly”.

The increased prices are also clearly visible in Europe, although the supply of food is not at risk. This is because the continent’s food production is largely self-sufficient, the EU Commission affirmed in a statement. However, the Brussels-based authority intends to take “all necessary measures to ensure that the EU, as a net food exporter and top agri-food producer, contributes to global food security”.

Use of ecological fallow land

One of the Commission’s aims is to allow member states to increase their production capacities by allowing fallow land to be used for agricultural purposes, at least temporarily. Within the framework of the Common Agricultural Policy (CAP), the decommissioning of these so-called ecological priority areas is mandatory for farms of 15 hectares or more.

The fallow land should serve to protect the environment and species and, according to the Commission, covers around 1.7 million hectares across the EU (out of just under 180 million hectares of agricultural land). The regulation allows so-called spring crops, in particular cereals, protein crops and oilseeds, to be cultivated there in 2022. This includes the use of pesticides and mineral fertilizers.

Almost all EU countries make use of the exemption. “Every hectare that we bring into cultivation in the EU helps,” says Austria’s Agriculture Minister Elisabeth Koestinger, for example. Only five countries have told the Commission that they intend to not make use of this option, a spokeswoman told Europe.Table. This includes Denmark, Malta, Romania and Ireland, as well as Germany. In response to an interpellation from the CDU/CSU parliamentary group in the Bundestag, the German government confirmed that a corresponding deadline had expired and that it was now no longer possible to make use of the exemption. This has sparked fierce criticism from the opposition.

Criticism of the German stance

Alber Stegemann, agricultural policy spokesman for the CDU/CSU in the German Bundestag, speaks of a “missed opportunity for food security. This does not live up to Germany’s ethical and moral responsibility, which goes far beyond supplying its own population.” Agricultural policy is also security policy, he said. After all, any contribution from Germany could ensure greater stability in North Africa. For Marlene Mortler, CSU agricultural politician in the European Parliament, it is “shameful how Germany currently presents itself in terms of agricultural policy in Europe.” The German government is “increasingly isolating itself in European society with this ideologically narrow-minded policy.”

The German Farmers’ Association (DBV) also criticizes Germany’s course. “The transformation of agriculture to greater sustainability must continue, we stand by this, but we do not understand why Brussels’ requirements for the increased use of fallow land and ecological priority areas are not being fully implemented in Germany,” said DBV President Joachim Rukwied.

However, the decision to omit the exemption did not come as a real surprise. After all, the German Bundesrat had already approved the procedure at the beginning of April. According to the decision, Germany’s farmers are not allowed to cultivate fallow land, but may harvest brush for use as animal feed. The entire exemption, including the use of pesticides and fertilizers, is criticized, according to a spokeswoman for the Ministry of Agriculture (BMEL).

‘Avoiding loss of biodiversity’

“Even though the Ukraine war is rightly the focus, we must not forget that we are in a situation of multiple crises and that fighting the climate crisis and species extinction no longer tolerates any delay.” Even now, half of humanity is “highly threatened” by climate change, in part because increasing droughts around the world threaten ever-lower crop yields.

Peter Feindt, Head of the Department of Agricultural and Food Policy at Humboldt University in Berlin, also warned that short-term measures to increase production would have a problematic effect in the long term. Any expansion of land would quickly lead to further, hardly acceptable losses of biodiversity. Instead of spending already tight financial resources on short-term effects, it is important to pursue effective agro-ecological concepts for the long term.

German agriculture Minister Cem Oezdemir gave specifics on what these might look like on German TV. For example, he said, the order of grain harvest should be changed. The food crisis is more of a distribution problem than a matter of availability. In fact, according to the Federal Institute of Food and Agriculture, about 58 percent of grain in Germany is used for animal feed, 20 percent for food production and about 17 percent for industrial and energy applications.

EU defense: more joint projects

Unlike in Russia, the end of the Second World War is no longer celebrated in the European Union with large military parades. However, the Russian invasion of Ukraine has also brought a different kind of attention to the armed forces in the European Union: Many member states, like Germany, have announced plans to invest more money in military spending and research.

Russia’s invasion of Ukraine is a tectonic shift for Europe, according to the Strategic Compass adopted by governments a few weeks ago. The 47-page document is intended to guide EU security concerns and actions for the next decade. The EU Commission, with the help of the European Defense Agency (EDA), was tasked with identifying gaps in European defense and coming up with appropriate proposals by mid-May.

The problem: defense procurement in Europe is highly fragmented. Member states purchase most of their equipment from domestic defense contractors, which is often inefficient and expensive. For more than a decade now, EU states have been trying to counteract the fragmentation. With limited success.

Italy’s Prime Minister Mario Draghi lashed out at the European Parliament last week, saying EU members spend three times as much on defense as Russia, but rely on 146 different weapons systems, saying. “It’s a profoundly inefficient distribution of resources that hinders the building of a true European defense.” He called for a high-level conference to discuss how coordination could be improved.

More money for the defense fund

First, however, the ball is in the EU Commission’s court. Accordi ng to the c urrent schedule, it will present its analysis of the investment gaps on May 18. While the authority refused to issue any statements in advance, industry insiders already know what to expect. Concrete ideas for improvements have been on the table for quite some time.

The Commission is expected to present new ideas for financing joint projects, says Luigi Scazzieri, a security expert from the Center for European Reform (CER). To this end, the Commission has already set up the European Defense Fund (EDF), which received about €8 billion from the EU budget for the period 2021 to 2027. It finances joint EU projects for the production of equipment within the framework of the PESCO programs. Twenty-five member states have pledged to cooperate more closely within the framework of Permanent Structured Cooperation (PESCO).

The commission is likely considering, according to Scazzieri, “more money for the EDF, more money for defense research, a new EDF bonus system to provide more funding for projects where member states commit to joint procurement and joint ownership”.

In September, von der Leyen also raised the possibility of reducing VAT on defense equipment produced in and for Europe. This measure could promote interoperability and counter dependencies, the Commission chief said in her State of the Union address. The idea was then again mentioned in a communication in February. Similar EDA projects have already been VAT-free since 2015.

Bonus system for joint projects

In response to a query, a spokeswoman stated that the Commission would submit a proposal in line with World Trade Organization rules by early 2023. It will also look into a bonus system that would free up more EU funds for cross-border or SME-driven projects, as well as other funding options.

The most ambitious option would be to take on new debt at the EU level, similar to the Covid Recovery Fund, to finance defense capabilities, Scazzieri said. But the commission spokeswoman calls this pure speculation. “And speculation is not something we comment on”.

But there will probably be new financial aid. But where will the EU institutions direct the additional money? This could also be deduced from existing documents, according to Scazzieri. The common priorities are already set out in the Strategic Compass and the EDA’s CARD report. The latter has been published once only so far in 2020 and provides an overview of existing defense capabilities in Europe as well as potential areas of cooperation. It also contains concrete recommendations for investments.

Tanks, ships, drones

The Strategic Compass aims to close critical gaps in so-called strategic enablers. These include things like airlift, space communications assets, amphibious capabilities, medical assets, cyber defense, and intelligence surveillance and reconnaissance capabilities, according to Scazzieri.

The CARD report is even more specific. The document identifies six priorities:

Tanks: Tanks: The EDA proposed to upgrade, modernize or procure new battle tanks for high-intensity conventional and crisis management operations. There would be 4,000 main battle tanks in 18 member states, many of which are obsolete. The existing fleets should be gradually replaced over the next decade and beyond.

Systems for soldiers: The personal equipment of European soldiers must also keep pace with the latest technological developments, such as the Internet of Things, the EDA said. This could be communication technology, night vision devices or handguns, for example. It is also important that the new equipment is built on a common European architecture.

Maritime: Renewing coastal and offshore patrol vessels is also a priority for the EDA. Europe’s need for security at sea is growing. Several Mediterranean nations already work on a concept for a European Patrol Corvette (EPC). The modern vessel is to be equipped with multiple systems and payloads to perform a wide range of tasks and missions with a modular approach.

Drone defense: Member states already invest heavily in their drone defense capabilities, but the EDA believes further development is important for the protection of the armed forces. This should also help create a European standard for A2AD territorial protection (means or strategies that prevent an enemy from occupying or crossing a land, sea, or air territory).

Space: For space, the EDA focuses on developing a European defense concept to improve access to space services and the protection of space-based assets. Investments in satellite communications and Earth observation are said to be key.

Military mobility: The priority is to improve logistics and the resilience of IT systems and processes for hybrid warfare (protection of seaports, cyber defense) within only a few years.

This all seems reasonable to Scazzieri. But to make it happen, governments would have to increase defense spending as promised and spend the extra money collectively, the CER expert says. “We will see how the promises can be kept in the face of competing priorities, and high inflation will eat into the real value of the budgets,” he says. Many EU countries will manage, and others will struggle. A big challenge will also be to spend the money cooperatively, “because there is still an instinct to think nationally when it comes to contracting,” he warns.

Cooperation is also complicated by divergent perceptions, says Jan Pie, Secretary-General of the Aerospace and Defence Industries Association of Europe (ASD). When it comes to Russia, he says, threat analysis is not standardized among member states: “It depends on the geographic location, even if you’re a NATO country.” This means that tanks make more sense for Finland, with its land border with Russia, than they do for France. By Ella Joyner

Macron and von der Leyen campaign for EU treaty reform

Emmanuel Macron and Ursula von der Leyen used Europe Day to campaign for far-reaching reform of the European Union. During the celebrations at the European Parliament in Strasbourg, France’s president expressed his support for amending the European treaties to this end. “We will have to reform our texts,” he said. One way, is to hold a constitutional convention, as the European Parliament demanded.

Macron spoke as acting EU Council president at the closing event of the conference on the future of Europe. Four citizen panels with 800 randomly selected participants had prepared a total of 49 proposals, and the final report was handed over yesterday. The citizens had shown politicians the way, von der Leyen said. The task now is to follow this path – “either by using the full limits of what we can do within the Treaties, or, yes, by changing the Treaties if need be“.

The President of the European Parliament Roberta Metsola again called for a convention for this purpose. The Future Conference had shown that there was a gap between the expectations of the citizens and what Europe could deliver, she said. Macron announced that he would spend the coming weeks calling for such a convention among the other heads of state and government and put it on the agenda of the June summit.

Specifically, Macron called for the majority principle in the Council to be extended to other areas. In addition, the EU would have to become more solidary. The organization of European elections, democratic control and the right of the European Parliament to initiate legislation should also be discussed at such a convention. Reforms are needed to strengthen the EU’s ability to act and thus unity.

Macron wants ‘EU light’

Last week, Italy’s Prime Minister Mario Draghi had already voiced his support for a further development of treaties. In parallel to Macron’s announcement, however, 13 EU states published a joint paper in which they expressed skepticism about “unconsidered and premature Treaty change“. Results are needed, not institutional discussions. The paper was supported mainly by northern and eastern EU countries, including Denmark, Poland, Romania and the Czech Republic.

Macron is not fazed by this. He envisions a Europe of different paces, with France and others as the vanguard. In order to bind countries like Ukraine, whose regular EU accession will take years and decades, new forms of cooperation are needed: Macron spoke of the “European political community,” which would also be open to former members such as the United Kingdom. The goal should be to give democratic states a new space for political cooperation, for example in the energy sector, in transport or the freedom of people and especially of young people, he said. He also wanted to campaign for this in the remaining weeks of the Council presidency.

Scholz open to the idea of political community

German Chancellor Olaf Scholz expressed support for the idea. However, this should not be allowed to deter countries in the Western Balkans that have EU accession aspirations, Scholz said in the evening before a meeting with Macron in the Chancellor’s Office. Regarding the demands for treaty changes in the EU, Scholz said that Germany would not stand in the way.

However, a more efficient EU can also be achieved below the level of amendments to the EU treaties. This would include abolishing unanimity in many policy areas. Shortly after taking office, Scholz had already opposed corresponding demands from France, because treaty changes in the EU often take years.

Von der Leyen also announced that she would propose new formats for citizen participation. The citizens’ panels should be given the necessary resources to develop their own recommendations before the Commission presents important legislative proposals. In addition, she would take up the ideas of the Future Conference and present first proposals based on them in her State of the EU address in September. tho

Citizens want CO2 capture for power plants

Europe’s citizens call for additional efforts to cut carbon emissions from gas and coal-fired power plants. Fossil-fuel power plants in the EU should be required to use “CO2 filters”, according to the final report of the Conference on the Future of Europe. Member states that lack the financial resources to do so should be supported. The report makes no statement on whether the captured carbon dioxide should subsequently be stored or reused in carbon cycles – for example, to produce synthetic fuels.

A climate expert at the Wuppertal Institute considers the proposal impractical. “If we greatly expand renewable energies, gas and coal-fired power plants will only run for a few hours each year,” Stefan Lechtenboehmer, Head of the Future Energy and Industrial Systems department, told Europe.Table. Retrofitting CO2 capture is only feasible for newer power plants, and even there it is only economical in exceptional cases. This could make sense, for example, if they used biomass, which would make negative emissions possible (BECCS).

“For climate protection purposes, it would make more sense to combine CO2 capture directly with underground storage (DACCS) or to use it for the production of blue hydrogen from natural gas during a transitional period until sufficient green hydrogen is available. This hydrogen could be used to operate both gas-fired power plants and industrial plants in a virtually climate-neutral manner,” says Lechtenboehmer. ber

Commission wants to limit EIAs for renewables

The European Union wants to speed up the approval of renewable energy. To this end, some renewable energy projects are to be approved in just one year, according to a draft made available to Europe.Table on Monday. With an amendment to the Renewable Energy Directive, the Commission wants to obligate member states to designate land or sea zones suitable for renewable energy where such projects have little impact on the environment.

“The permit-granting process for new projects located in renewables go-to areas shall not exceed one year,” the document states, noting that this period can be extended by three months under extraordinary circumstances. By comparison, the EU currently has a two-year time limit for approval of such projects, which can be extended by an additional year.

The key element of the speed-up is that the obligation to carry out project-related environmental impact assessments (EIA) in go-to areas is to be abolished. Instead, only a strategic environmental assessment (SEA) will suffice when selecting go-to areas. However, biomass combustion plants and projects that have a significant impact on other member states are excluded from the EIA exemption. In the designation of go-to areas, priority is to be given to “artificial areas“, such as roofs, parking lots, roads and railroads, and degraded soils.

In Germany, an EIA obligation currently applies to large wind farms with at least 20 turbines. However, for wind farms with as few as three turbines, the relevant authority is required to carry out a simplified preliminary assessment to determine whether an EIA is required.

The approval and construction of renewable energy projects would in future be classified as being in the “overriding public interest“, in line with the German government’s plans. According to the EU draft, however, states would be given the option of limiting the regulation to individual regions, technologies or projects with certain technical characteristics.

The Greens in the European Parliament see a missed opportunity to include even more provisions in the Renewable Energy Directive. “With nice words and intentions, we do not build solar cells or install them on Europe’s roofs. But this is exactly the direction the EU Commission seems to be going. We need a legislative proposal with a legally anchored solar obligation and European solar financing,” said MEP Michael Bloss. ber/rtr

Von der Leyen in Hungary: progress on oil embargo

On Monday, European Commission President Ursula von der Leyen said she had made progress in talks with Hungarian Prime Minister Viktor Orbán on a possible EU-wide ban on Russian fossil fuels.

“This evening’s discussion with PM Viktor Orban was helpful to clarify issues related to sanctions and energy security,” von der Leyen said in a tweet. “We made progress, but further work is needed,” she added.

Von der Leyen announced that she would schedule a videoconference with other countries in the region to strengthen regional cooperation on oil infrastructure. rtr

Slow progress in talks on liquefied natural gas from Qatar

According to insider reports, negotiations on liquefied gas supplies from Qatar for Germany are going slowly. The main reason is that Qatar insists on long-term supply contracts spanning at least 20 years, people familiar with the talks told Reuters. The German negotiating partners have little interest in this, however, as Germany wants to become carbon-neutral as early as 2045.

According to the latest legislation passed by the cabinet, the energy sector is to be virtually CO2-free as early as 2035. This would mean that gas would no longer be allowed to be used for heating or power generation. For the next few years, however, Germany will have to rely on liquefied gas to replace Russian pipeline gas.

The German Federal Ministry of Economics and Technology declined to comment, as did Qatar’s government. Gas importers Uniper and RWE also refused to comment. German Economics Minister Robert Habeck visited Qatar in March and subsequently spoke of an energy partnership. According to insiders, the Emir of Qatar, Tamim bin Hamad Al Thani, plans to visit Germany before the end of May to sign an agreement. This does not mean, however, that supply contracts have already been agreed upon, people familiar with the plans for the visit said. rtr

Scholz talks with Xi

German Chancellor Olaf Scholz (SPD) and China’s leader Xi Jinping exchanged views on Monday on the Russian attack on Ukraine, including its impact on global food supplies and energy security. He said the video conference also covered “the development and consequences of the COVID-19 pandemic, deeper cooperation on climate protection, energy transformation and EU-China relations.”

In addition, a further deepening of bilateral relations and cooperation in the economic sector were discussed, the German government announced in a press release containing only eleven lines.

In an interview with the German television station Phoenix on Sunday, SPD leader Lars Klingbeil called for a different approach to the People’s Republic. Politicians and industry leaders had always insisted on a political consensus with Moscow. That was a mistake, Klingbeil admitted, and drew the conclusion that one must “act differently and be more critical” toward China today. China has not condemned the Russian invasion of Ukraine. Instead, it blames the US and NATO for the war. grz

Match sues Google over Play Store fees

Dating app company Match sued Google on Monday, calling the lawsuit a “last resort” to prevent Tinder and its other apps from being banned from the Play Store. They refuse to share up to 30 percent of their revenue.

Match’s lawsuit is the latest to target Google’s alleged anti-competitive behavior in the Play Store. It joins ongoing lawsuits from “Fortnite” maker Epic Games, dozens of US state attorneys general, and others.

Google did not respond to a request for comment on the new lawsuit, but said developers have the ability to bypass the Play Store. It also said Google has lowered fees and created other programs to address antitrust concerns. rtr

Social emissions trading for buildings and transport is necessary and possible

Martin Menner and Götz Reichert

**Martin Menner** and **Goetz Reichert** of the Center for European Politics

It is the most controversial proposal of the European Commission’s “Fit for 55” climate package: the introduction of a separate EU emissions trading system for carbon emissions from buildings and road vehicles (ETS 2). No wonder: To be able to also achieve the stricter EU climate targets in these sectors, ETS 2 would make fossil fuels and heating fuels more expensive. In the future, consumers would see directly at the gas pump and in their heating bills that climate protection has its price. This is always unpopular, and especially in times of rapidly rising inflation, it would hit people with lower and middle incomes particularly hard.

No one wants social upheaval, and politicians vividly remember the French yellow vest protests, which were sparked by a CO2 price surcharge on gasoline and diesel. From the very beginning, opposition to an ETS 2 has been strong – not only from Eastern European EU member states, but even within the Commission, which has proposed a social climate fund to mitigate the social impact.

Still, the ETS 2 could now completely fail in both the European Parliament and the Council. This would be a fatal mistake for climate policy, because an ETS 2 can reduce CO2 emissions more effectively and more cost-effectively than other climate protection instruments and can be designed in a socially responsible way at the same time.

ETS 2 is indispensable to achieve EU climate targets

While carbon emissions from energy-intensive sectors and power generation have already been capped by ETS 1 since 2005 and reduced as desired, carbon emissions from buildings have barely fallen over the same period and emissions from road transport have, in fact, increased, despite various climate protection measures such as CO2 fleet limits for cars, vans and trucks. There are several reasons for this:

The decisive factor is that emissions trading caps the total quantity of emissions allowances and thus the maximum permissible CO2 emissions and steadily reduces them to ensure that the predefined climate target can be reliably achieved. In ETS 2, companies must hand over a corresponding number of emission rights for the amount of fuels they put on the market (upstream emissions trading). The constant scarcity of available emission rights causes their price to increase, which in turn means that the use of fossil fuels, for example, becomes accordingly more expensive compared to lower-CO2 alternatives.

In this way, the CO2 price signal set incentives for CO2-saving behavior. Thus, in the face of rising fuel prices, people could drive less and more slowly, switch to a fuel-efficient vehicle or use public transport.

ETS 2 as a long-term price signal

By contrast, in the road transport sector, for example, CO2 limits for road vehicles that have been in place for years were unable to achieve either an effective or a cost-efficient carbon reduction. This is not only because, unlike emissions trading, they apply only to new vehicles and not to old ones. In fact, more fuel-efficient vehicles imposed by CO2 limits do lead to relative fuel savings. However, the resulting savings in fuel costs tend to encourage people to drive heavier and more powerful vehicles and to drive more kilometers. The bottom line is that absolute fuel consumption and associated CO2 emissions actually increase. The decreasing cap of the ETS 2 would counteract such rebound effects.

In addition, ETS 2 would send out a strong signal that the prices of fossil fuels will rise in the long term, even if the global price for oil and gas drops again. Consumers and companies could prepare for this, which would provide planning and investment security for the transition to alternative vehicle drives and low-CO2 heating systems, for example. Furthermore, decarbonization of these sectors will make Europe less dependent on imports of fossil fuels, including from Russia.

Overall, without ETS 2, the carbon reduction instruments of the Fit for 55 climate package, would lack the central element for carbon reduction for buildings and road transport. Given the climate policy shortcomings of the past and its tightened climate targets, the EU simply cannot afford to continue without the introduction of emissions trading for these sectors.

Social ETS 2 is necessary and possible

European climate policy can only be successful in the long term if it is accepted as socially balanced both by citizens and among member states. The good news is that an ETS 2 can certainly be designed in a socially responsible way.

The decisive factor for broad acceptance of ETS 2 among the population is not the level of the CO2 price it generates for fossil fuels and heating, but the effective burden on citizens. By appropriately using the proceeds from the auctioning of ETS 2 allowances and designing the proposed climate social fund, excessive burdens on low and middle incomes could be avoided via per capita transfer payments.

If ETS 2 proceeds are largely paid out as identical per capita payments to all citizens who have to pay taxes on them above a certain income level, large parts of the population can be sufficiently compensated for the rising CO2 prices of ETS 2. Thus, the “regressive” CO2 pricing leads to an overall relief that decreases with income. This is a socially just outcome, because citizens with higher incomes heat more residential space on average, drive larger cars, and subsequently produce more CO2 emissions. Furthermore, climate protection measures would be financed in a more socially just way through “progressive” taxes instead of a “regressive” CO2 price.

If member states were obligated to pay out a good portion of the ETS 2 auctioning proceeds to their citizens on a per capita basis and to provide specific support for severe cases, the complex process of drawing up comprehensive climate social plans, as proposed by the Commission, would also be eliminated. By eliminating the bureaucratic climate social plans, the Climate Social Fund would thus become a pure transfer instrument.

Overall, a social design of the ETS 2 is possible. Even if, in the short term, the current sharp rise in inflation and skyrocketing energy prices increase opposition to the introduction of a CO2 price on fossil fuels and heating, an ETS 2 is the right way to decarbonize the building and road transport sectors in the long term. Therefore, the European Parliament and the Member States should be aware of their responsibility for climate protection and social equity and not continue to block the effective, cost-efficient and socially feasible climate protection instrument of the ETS 2 out of unfounded fear of social upheaval. This climate policy opportunity cannot be squandered now.

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