Neglect of CBAM + Sanctions against Gazp • Table.Briefings

Dear reader,

In the next few days, Finland’s government plans to take the formal decisions still needed to join NATO. The country, which shares a border of more than 1,300 kilometers with Russia, wants to join the defense alliance immediately, and Sweden could soon follow. Russia’s angry reaction was not long in coming.

After Russia announced sanctions against parts of the gas company Gazprom Germania on Wednesday, Economics Minister Robert Habeck yesterday gave a slight all-clear. He said Russia did not want to stop trade but was using energy as a weapon.

Progress on the Carbon Boundary Adjustment Mechanism (CBAM) is slow to none. Lukas Scheid and Till Hoppe have analyzed why one of the most important instruments for decarbonizing industry and protecting against carbon leakage is so neglected by the German government.

These days, Switzerland is struggling less with the fear of a gas supply freeze than with the fear of a lack of electricity. The country is in danger of losing its connection to the EU’s internal electricity market, at the latest when, from 2025, neighboring countries will have to reserve a good part of their capacities for trade with EU countries. Stephan Israel explains the background.

Your
Lisa-Martina Klein

CBAM: in Berlin only a distant second

European heavy industry is facing a massive transformation in the coming years. Sectors such as the steel and chemical industries will have to switch to climate-neutral production, which will require enormous investment. At the same time, however, the companies’ products must be competitive on the world market – otherwise production will move abroad.

This is particularly true for Germany: The Federal Republic is Europe’s largest steel producer with an annual production of around 40 million tons of crude steel (2021) and the largest cement producer with over 34 million tons per year (2019). Currently, the industries still benefit from free CO2 certificates, so they do not have to pay the full price in the European emissions trading system and thus remain internationally competitive.

The Carbon Border Adjustment Mechanism (CBAM) would change the principle. Industry would henceforth pay in full for its CO2 emissions, and to ensure fair competition, imports to Europe would be subject to border adjustment. However, the mechanism has not yet been tested, which is why there is great hesitation in both industry and politics.

The German government always emphasizes its support for the instrument, for example in the coalition agreement, in the inaugural climate protection report of the Federal Ministry of Economics and Climate Protection, and at the Ecofin in mid-March. The latter commitment, however, left more questions open than it answered. German Finance Minister Christian Lindner (FDP) called for an adjustment to the role of free certificates, without explaining in more detail how. Ecofin instead passed the unanswered questions to the environment and climate ministers. There they still lie.

‘Only paying lip service’ to CBAM

The BMWK, which is led by the Greens, is now responsible at the Council level for the German position on the CBAM and the handling of free CO2 certificates for industry. In the house, where former European parliamentarian Sven Giegold and climate policy expert Patrick Graichen serve as state secretaries, the topic has so far been a distant memory in view of many other construction sites, as the ministry also admits. Significantly, the BMWK did not answer an inquiry about the CBAM by the editorial deadline. This is one of the reasons why coordination with the other ministries has been so slow.

There is criticism of this from several sides. The industry misses a decisive stand for its interests. It is not acceptable that the German government is only able to speak to a limited extent on this issue, industry circles say, because the design of the CBAM is of the utmost importance for the sectors concerned. Berlin’s initial positioning at the meeting of EU finance ministers in March was far too vague, they say. ” Unfortunately, European policy coordination has hardly improved under the traffic light coalition,” says an industry representative.

The impression that the CBAM is not being given the attention it needs is shared by Anne Gläser, CO2 pricing officer at the NGO Germanwatch. Although Berlin has paid lip service to the issue, there is not much substance behind it so far. The expert hopes that the German government will take a more progressive role in the Council and work to include more sectors than the Commission proposal and introduce border adjustment earlier. However, her hopes are not high: “the German government would not care if the free allocations continued and the CBAM came later,” Gläser believes.

Still no solution for exports

This is mainly because the CBAM does not provide carbon leakage protection for exports. Germany, as the EU’s largest export nation, has no keen interest in a mechanism that includes a CO2 levy for those products that need to be competitive outside Europe – even if the CBAM could increase the speed of decarbonization of industry. Gläser even understands this conflict of interest in the BMWK. After all, there is no denying that industry needs to be protected from carbon leakage.

The industry is therefore also calling for Germany to take a proactive role. “Appropriate calculation methods, competitiveness in the downstream value chains or relief for exports – all necessities for the chemical industry for which no solutions are in sight,” criticizes Matthias Blum, trade expert of the German Chemical Industry Association (VCI). He demands that the German government lobby Brussels to exempt the chemical and pharmaceutical industry from the CBAM.

Export rebates probably not WTO-compatible

Another way to protect the German export industry would be so-called export rebates. These export rebates could take the form of free CO2 certificates for the number of products exported.

However, this will hardly be possible with the Commission. It had removed such an option from its proposal for the CBAM even before the publication of the Fit for 55 package. The reason: lack of WTO compatibility and the absence of a price signal for the industry to encourage decarbonization. And because the German government itself always stresses the need for WTO compatibility, this option is not on the table in Berlin either. Instead of taking the initiative itself to drive forward solutions for exports, the German government is supporting the Commission’s proposal.

Another option would be the climate clubs announced by the German government itself with Germany’s most important trading partners. Club members could be granted an exemption from the CBAM, allowing companies to export there without a CO2 surcharge. However, such a climate club would only live up to its name if all members actually agreed on climate-friendly production. So far, there is a lack of approaches as to how this could be achieved.

The chemical industry sees the German government as having a duty here: it should focus “as quickly as possible on establishing the climate club announced in the coalition agreement,” says Matthias Blum of the VCI. “Here we are still waiting for substantial impetus.” With Till Hoppe

Switzerland the power island

A study by the Swiss electricity regulator Elcom recently startled the public between Zurich and Geneva: Switzerland could be threatened with 47 hours without electricity every winter from 2025. At least in the most pessimistic scenario calculated in the study. That is, at the end of March, when the lakes and rivers have little water and the demand for electricity is traditionally high.

But that’s not all: the Russian war in Ukraine is now threatening supply bottlenecks for gas as well. Switzerland covers only 15 percent of its energy needs with gas, half of which comes from Russia. However, Switzerland does not have its own gas storage facilities. Hopes of Energy Minister Simonetta Sommaruga that she could benefit from a planned solidarity agreement between Germany and Italy were quickly dashed. The legal basis for bilateral agreements between EU states is the European SoS Regulation. The way is not open for Switzerland as a non-member.

Finance Minister Ueli Maurer, for example, recently traveled to Qatar in a similar fashion to his European counterparts and established contacts there with a view to LNG supplies. However, the looming electricity gap is the bigger challenge for Swiss policymakers in the longer term. In 2020, Switzerland produced 65.5 terawatt hours of electricity, with hydro and nuclear power plants contributing 58 and 33 percent, respectively. In the winter half of the year, Switzerland must import electricity; in the summer, it can export surpluses.

Switzerland has secured nuclear power from France via long-term contracts, but also imports from Germany in the winter half-year. Germany plans to shut down its last nuclear power plants at the end of the year, nuclear power from France has recently been less available due to a series of breakdowns, and the country’s own reactors are also tending to supply less electricity. In 2017, Switzerland decided by referendum that no more new nuclear power plants could be built. The four nuclear power plant units still in operation are to be shut down by 2034 at the latest.

Gas-fired power plants and pumped storage as reserve

How the country can fill the resulting gap, however, is unclear. The electricity regulator Elcom has proposed building two to three gas-fired power plants with a total capacity of 1000 megawatts. However, even before Russia’s attack on Ukraine, Switzerland wanted to become independent of fossil fuels. Energy Minister Simonetta Sommaruga therefore also wants to strengthen security of supply in winter with new reservoirs and create a hydroelectric power reserve for emergencies. Yet, such projects traditionally meet with great resistance in the affected regions.

The risk of a blackout in winter is more acute than ever, Christoph Mäder of the Economiesuisse trade association recently warned. The expansion of renewable energies is making far too little progress. Parts of the business community and the right-wing liberal Swiss FDP are now questioning the nuclear phase-out. However, a new referendum would be needed for an exit from the phase-out, and a renaissance of nuclear energy would have no chance there as things stand today.

It is not only the Swiss energy transition that is unregulated. The unresolved relationship with the EU is also a complicating factor. In May of last year, after eight years, Bern unilaterally broke off negotiations on a new basis for bilateral relations, much to Brussels’ chagrin. A framework agreement was supposed to bring order to the thicket of more than 120 bilateral treaties that Switzerland had used to secure sectoral access to the EU’s single market after voting no to the European Economic Area (EEA). Switzerland would have committed itself to dynamically adapting its previously static agreements to the new EU law. In the event of conflicts, the European Court of Justice in Luxembourg would have had the final say.

Electricity agreement is a long time coming

Without the framework agreement, the EU wants to let this privileged partial membership erode and not conclude any new internal market agreements with Switzerland. An electricity agreement has actually been in the pipeline for years and now remains blocked for the foreseeable future. At stake is not least Switzerland’s historic role as a hub for electricity flows in Europe.

With its pumped storage plants in the Alps, Switzerland would actually be predestined to play the role of Europe’s battery, just like Norway. Instead, Switzerland is now in the process of losing its connection to the EU’s internal electricity market. Elcom has forfeited its observer status with the European regulatory agency Acer, and Swissgrid is fighting for its place with Entso-E, the association of network operators.

The next step is to be excluded from the so-called balancing energy market. This is used to keep the grid stable and to balance it in the event of unplanned power flows. From 2025, Switzerland’s neighboring countries will have to reserve at least 70 percent of cross-border capacities for trading between EU states. Switzerland’s physical connections to the European electricity market will remain in place. But trading and balancing the grid is likely to become more complex and also more expensive for the players. Experts expect losses of up to one billion francs by 2030.

Finland wants to join NATO – Russia announces reaction

In the wake of Russia’s invasion of Ukraine, top Finnish leaders have called for Finland to join NATO. “Finland must immediately apply for NATO membership,” President Sauli Niinistö and Prime Minister Sanna Marin said in a joint statement in Helsinki on Thursday. The Russian government reacted with sharp criticism and announced countermeasures.

Sweden, which has also been neutral up to now, is also expected to express a desire to join because it feels threatened by Russia. The US Department of Defense stated that it is expected Finland and, if necessary, Sweden will also be quickly granted membership in the transatlantic military alliance. This would pave the way for an increased troop presence in Scandinavia already during the one-year ratification period. NATO Secretary-General Jens Stoltenberg said the Finns would receive a “warm welcome.” He promised a “smooth and speedy” accession process.

Chancellor Olaf Scholz had already made it clear last week that Germany supports both countries joining NATO. In an initial statement, Danish Prime Minister Mette Frederiksen also spoke out in favor of rapid accession. The Baltic states in particular are in favor of Finland and Sweden joining NATO because this would make it easier for NATO and EU members Estonia, Latvia and Lithuania to protect themselves from a Russian attack.

Finland has a 1300 kilometer border, in the course of the Second World War there was a Soviet invasion. After World War II, the country remained neutral so as not to strain relations with the then Soviet Union and then Russia. However, as an EU member, Finland, which like Sweden joined the European Union in 1995, is already involved in some joint military structures. Russia had warned Finland against joining NATO. rtr

Gazprom: concern and relief

According to the German side, Russian sanctions against Gazprom Germania paradoxically facilitate the refilling of storage facilities, but mean further political escalation. “Russia is using energy as a weapon,” Economics Minister Robert Habeck said in Berlin on Thursday. However, he said, the country is prepared for this situation. Ten million cubic meters of gas a day would now no longer flow to Germany. This corresponds to three percent of Russian supplies over the rest of the year and can be replaced – albeit at higher prices. This is probably the aim of the sanctions against Gazprom-Germania, which is under German control, and its trading subsidiaries.

Despite presumably higher prices, the Federal Network Agency sees new supply contracts as positive. It will now be easier for Germania’s subsidiaries to fill Rehden, Germany’s largest storage facility, said Klaus Müller, head of the authority. He pointed out that Russia was not sanctioning the pipeline operators under the umbrella of Gazprom Germania, so the gas could continue to flow via Nordstream I, for example, and be distributed in Germany. So Russia apparently wants to continue the trade, he said.

On Wednesday, the Russian government banned business dealings with Gazprom Germania and other former subsidiaries of Russian state-owned Gazprom abroad. The ruling affects a total of 31 companies. Gazprom Germania had been placed under German state control at the beginning of April.

However, another conflict could loom if Russia were to stop accepting euro or dollar payments for gas from the West. Russia had demanded new arrangements with ruble payments, but these are considered unclear. The utility RWE said it was in close contact with the German government on this and expected clarifications shortly. Many bills must be paid in May. Then it will probably become clear whether they will be accepted. rtr/dpa

Commission announces assistance for wheat exports from Ukraine

The EU Commission is offering Ukraine help with wheat exports. “20 million tons of grain must be brought out of Ukraine in less than three months with the help of the EU,” EU Transport Commissioner Adina Valean said Thursday. To that end, a logistics platform should be set up and member states’ storage capacities reviewed. Transport by train poses a challenge because the track width in Ukraine is different from that in Europe.

The wheat would have to be reloaded at the border, but this would not be possible in many places. Furthermore, guarantees for forwarders who send their vehicles to Ukraine are to be examined. The EU Commission also called on member states and companies to provide sufficient personnel and material and to give priority to Ukrainian agricultural export shipments at the terminals.

Ukraine, along with Russia, is considered one of the world’s most important grain suppliers. Since the Russian attack on Ukraine, food security has been threatened in many poor countries, especially in Africa, according to a UN report. rtr

Facilitated aid schemes expire at the end of June

The relaxation of EU rules that allowed member governments to grant more than €3 trillion in state aid to thousands of companies affected by the COVID-19 pandemic over the past two years will end on June 30, EU competition authorities said Thursday.

Of this amount, about €730 billion were actually spent, according to the European Commission. “The improving economic situation in the light of the easing of restrictions is the main reason why we have decided not to extend the Temporary Framework for State Aid beyond June 30, 2022,” Commission Vice President Margrethe Vestager said in a statement.

However, investment support measures will continue until the end of this year and solvency support measures until the end of 2023.

The EU executive said it would consider later this year whether to extend beyond Dec. 31 the eased rules on state aid to help companies affected by sanctions imposed on Russia. rtr

EU wants a greater role in Asian ‘tension field’

European Union leaders said Thursday the EU wants to become a bigger player in Asia, which they described as a “theater of tension.” They warned of an increasingly assertive China, calling on Beijing to defend the multilateral world order.

The call was made at a joint press conference in Tokyo following an EU-Japan summit attended by European Commission President Ursula von der Leyen, European Council President Charles Michel and Japanese Prime Minister Fumio Kishida. A day earlier, Beijing warned the summit not to “badmouth” China.

The trio announced they would continue talks on how to expand their partnership in the fight against Russia over its invasion of Ukraine in areas such as energy and aid, and in a joint statement called for an immediate cessation of hostilities.

However, Michel and von der Leyen also said they were aware of regional tensions in Asia and that the EU wanted – and needed – to play a greater role. “The Indo-Pacific is a thriving region. It is also a theater of tension,” von der Leyen said. “Take the situation in the East and South China Seas and the constant threat from the DPRK (North Korea).”

Both warned against China’s close ties with Russia, calling its actions in Ukraine a “special military operation,” and condemned unilateral efforts to change the status quo in any region of the world. “Our cooperation in Ukraine is crucial, but it is also important in the Indo-Pacific region, and we want to deepen our consultations on a more assertive China,” Michel said. “We believe China must defend the multilateral system from which it has benefited.”

Reluctance to ban oil imports

The meeting came a day after China said that while a strong relationship between the EU and Japan would be beneficial, it should not go too far. “I must stress that the EU-Japan summit is a matter between themselves, but they should not speak ill of China, let alone interfere in China’s internal affairs,” Chinese Foreign Ministry spokesman Zhao Lijian said Wednesday.

Both Michel and von der Leyen welcomed Japan’s participation in measures against Russia, including sanctions. Tokyo has joined the European Union and the Group of Seven in imposing trade sanctions on Russia that limit Moscow’s ability to export oil and gas.

Japan, however, is highly dependent on energy imports, including purchases from Russia. Last week, Kishida said Japan would “in principle” ban Russian oil, but it was more reluctant to divest from some projects. The three officials met in the Japanese capital for an annual conference held online last year because of the COVID-19 pandemic, a day after Finnish Prime Minister Sanna Marin met with Kishida and just hours before Finland announced it would apply to join NATO. rtr

Massive criticism of Johansson child protection proposal

The proposal presented on Wednesday to combat child abuse depictions on the Internet by EU Commissioner for Home Affairs Ylva Johansson (Europe.Table reported) is drawing massive criticism. The Federal Data Protection Commissioner, Ulrich Kelber, announced that, after initial examination, he would advocate “that the regulation does not come in this form”.

Kelber sees the Commission’s plans as threatening the principle of confidentiality of communications and considers the planned regulations to be a deliberate weakening of encrypted communications that “open the door to abuse.” The planned use of so-called artificial intelligence to detect misrepresentations is “very prone to error” and threatens to cause mass suspicions of blameless citizens. The introduction of mandatory age checks and regulations for upload filters, as proposed by Johansson, are also unacceptable in the view of the BfDI.

The Chaos Computer Club also expressed massive reservations about the Johansson proposal. It is ineffective for the stated goal, it says, because it threatens to overburden the investigating authorities and does not even target the real communication channels of the perpetrators. It is also incompatible with European and German fundamental rights when weighed against each other.

The Internet industry association Eco also voiced massive criticism: “In our view, the draft has the potential to create a free pass for state surveillance,” said Alexandra Koch-Skiba, head of eco’s complaints office “This is ineffective and illegal.” What’s primarily lacking, she said, is more staff for investigations and comprehensive law enforcement. The Internet industry is always ready to help in the real fight, according to the offer made to Commissioner Johansson.

The Federal Ministry of the Interior and the Federal Ministry of Justice have so far avoided any comment on the EU proposal, saying that they are still in the review phase of the proposal and do not want to comment on it. In response to inquiries about the fundamental question of whether Internet blocking and filtering obligations on the part of service providers are, in their view, sensible tools in the fight against child abuse depictions, neither ministry was able to respond by the time of going to press. Meanwhile, it is public knowledge that Johansson already raised the issue of her ideas during a visit to Interior Minister Nancy Faeser (SPD) (Europe.Table reported). fst

What’s cooking in Brussels?

Claire Stam

It has become a classic of Brussels politics for legislative texts to be leaked to the press shortly before their official presentation. These “leaks” are a strategy that allows the EU institutions to gauge the current political temperature and make last-minute adjustments just in case – you never know.

“The package was prepared under the leadership of the Directorate-General for Energy in coordination with the other Directorates-General. The von der Leyen cabinet has followed the work closely, which shows how important this package is for the Commission presidency ” notes an observer closely associated with the RePowerEU package.

However, working out the package was difficult: “The work was done frantically. At times we had a black-box phenomenon vis-à-vis the Commission, that is, you didn’t know who exactly was doing what in the Commission,” the observer continues. And he explains, “member states put pressure on the Commission.”

Call for European solar law

An example? On May 4, energy ministers from five EU countries asked the European Commission to propose a European solar law to massively accelerate the expansion of photovoltaics (PV). The letter to Commission President Ursula von der Leyen and “Green Deal” chief Frans Timmermans was signed by ministers from Austria, Belgium, Lithuania, Luxembourg and Spain.

“The EU still has the best PV manufacturing R&D in the world, and given the new technologies, we can rebuild a competitive PV industry in Europe. If the current challenges and market failures of European PV manufacturing are not adequately addressed, the EU risks turning dependence on Russian oil and gas into increasing long-term dependence on raw materials and PV hardware imports from China or other emerging global PV suppliers,” they warn.

As a reminder, according to a summary document, the Commission’s plan to decouple from Russian gas is based on four pillars: saving energy, diversifying energy supply sources, accelerating the green transition, and combining investment with reform. The package is also expected to include a strategy to accelerate the deployment of solar energy in the EU.

International energy strategy and diplomacy

The letter from the five European energy ministers points to another aspect of the package to be unveiled next week: the geopolitical and diplomatic dimension of energy. For in addition to RePowerEU, there is the EIS. That’s European jargon for “European International Strategy” – in plain language, cooperation between the European Union and countries that are outside the Union.

“Behind EIS is the credibility of the European Union on the international stage in terms of energy and climate policy. It’s about strengthening it, giving it more bite again,” explains our observer. The international energy strategy is conceived as a strategic framework for engagement that will shape the EU’s future energy diplomacy and the external dimension of the EU’s Green Deal, he further explains.

Or, to put it another way, what is at stake is that it becomes, as such, a strategic framework for engagement that not only provides tools to respond to the ongoing energy crisis, but rather enables and strengthens the EU’s “Green Deal” objectives – precisely to enhance EU credibility and assertiveness on the international stage. After all, the process that led to the creation of this international energy strategy began with the “Green Deal” Communication issued by Ursula von der Leyen’s self-proclaimed geopolitical European Commission in late 2019.

This was followed by the January 2021 Foreign Affairs Council (FAC) conclusions, a first attempt to translate the goals of the Green Deal into future EU climate and energy diplomacy.

“RePower Ukraine” initiative

Contexte also obtained the document on the new “European energy diplomacy” dictated by the new geopolitical circumstances, with a focus on the need to diversify energy supplies and support Ukraine. Thus, a “RePower Ukraine” initiative is announced for the country’s energy independence.

To replace Russian gas, the Commission is counting in part on gas from other countries, liquefied or not. It also anticipates diversifying energy supplies with nuclear fuels. A comprehensive Mediterranean partnership for green hydrogen and increased cooperation with the Gulf region are also planned.

A “European Hydrogen Facility” already announced in the March 8 communication is confirmed for the end of 2022. And increased cooperation on energy efficiency and renewables is also planned with Africa, the Western Balkans and the Indo-Pacific region.

The Foreign Affairs Council conclusions provided a general framework outlining priorities for shaping European climate and energy diplomacy in line with the EU’s Green Deal objectives.

The strategy should have been published by the end of 2021, but the process was delayed due to the fossil fuel price and supply crisis in 2021 and Russia’s war of aggression in Ukraine.

Schröder on sanctions list?

What else was important this week: the liberal Renew Europe group in the European Parliament confirmed reports that it wants to expand the list of people affected by EU-Russia sanctions to include Europeans who sit on the boards of major Russian companies, including former German Chancellor Gerhard Schröder.

The text, to be voted on in plenary next week, “calls on the Council to extend the list of persons covered by EU sanctions to European members of the boards of major Russian companies, including in particular ex-Chancellor Gerhard Schröder.” Such a step has not yet been proposed by the Union.

At the time of writing, it was still unclear whether the two largest groups in Parliament, the European People’s Party and the Socialists and Democrats – the group which, of course, includes the members of the SPD – would support the draft resolution.

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

In the next few days, Finland’s government plans to take the formal decisions still needed to join NATO. The country, which shares a border of more than 1,300 kilometers with Russia, wants to join the defense alliance immediately, and Sweden could soon follow. Russia’s angry reaction was not long in coming.

After Russia announced sanctions against parts of the gas company Gazprom Germania on Wednesday, Economics Minister Robert Habeck yesterday gave a slight all-clear. He said Russia did not want to stop trade but was using energy as a weapon.

Progress on the Carbon Boundary Adjustment Mechanism (CBAM) is slow to none. Lukas Scheid and Till Hoppe have analyzed why one of the most important instruments for decarbonizing industry and protecting against carbon leakage is so neglected by the German government.

These days, Switzerland is struggling less with the fear of a gas supply freeze than with the fear of a lack of electricity. The country is in danger of losing its connection to the EU’s internal electricity market, at the latest when, from 2025, neighboring countries will have to reserve a good part of their capacities for trade with EU countries. Stephan Israel explains the background.

Your
Lisa-Martina Klein

CBAM: in Berlin only a distant second

European heavy industry is facing a massive transformation in the coming years. Sectors such as the steel and chemical industries will have to switch to climate-neutral production, which will require enormous investment. At the same time, however, the companies’ products must be competitive on the world market – otherwise production will move abroad.

This is particularly true for Germany: The Federal Republic is Europe’s largest steel producer with an annual production of around 40 million tons of crude steel (2021) and the largest cement producer with over 34 million tons per year (2019). Currently, the industries still benefit from free CO2 certificates, so they do not have to pay the full price in the European emissions trading system and thus remain internationally competitive.

The Carbon Border Adjustment Mechanism (CBAM) would change the principle. Industry would henceforth pay in full for its CO2 emissions, and to ensure fair competition, imports to Europe would be subject to border adjustment. However, the mechanism has not yet been tested, which is why there is great hesitation in both industry and politics.

The German government always emphasizes its support for the instrument, for example in the coalition agreement, in the inaugural climate protection report of the Federal Ministry of Economics and Climate Protection, and at the Ecofin in mid-March. The latter commitment, however, left more questions open than it answered. German Finance Minister Christian Lindner (FDP) called for an adjustment to the role of free certificates, without explaining in more detail how. Ecofin instead passed the unanswered questions to the environment and climate ministers. There they still lie.

‘Only paying lip service’ to CBAM

The BMWK, which is led by the Greens, is now responsible at the Council level for the German position on the CBAM and the handling of free CO2 certificates for industry. In the house, where former European parliamentarian Sven Giegold and climate policy expert Patrick Graichen serve as state secretaries, the topic has so far been a distant memory in view of many other construction sites, as the ministry also admits. Significantly, the BMWK did not answer an inquiry about the CBAM by the editorial deadline. This is one of the reasons why coordination with the other ministries has been so slow.

There is criticism of this from several sides. The industry misses a decisive stand for its interests. It is not acceptable that the German government is only able to speak to a limited extent on this issue, industry circles say, because the design of the CBAM is of the utmost importance for the sectors concerned. Berlin’s initial positioning at the meeting of EU finance ministers in March was far too vague, they say. ” Unfortunately, European policy coordination has hardly improved under the traffic light coalition,” says an industry representative.

The impression that the CBAM is not being given the attention it needs is shared by Anne Gläser, CO2 pricing officer at the NGO Germanwatch. Although Berlin has paid lip service to the issue, there is not much substance behind it so far. The expert hopes that the German government will take a more progressive role in the Council and work to include more sectors than the Commission proposal and introduce border adjustment earlier. However, her hopes are not high: “the German government would not care if the free allocations continued and the CBAM came later,” Gläser believes.

Still no solution for exports

This is mainly because the CBAM does not provide carbon leakage protection for exports. Germany, as the EU’s largest export nation, has no keen interest in a mechanism that includes a CO2 levy for those products that need to be competitive outside Europe – even if the CBAM could increase the speed of decarbonization of industry. Gläser even understands this conflict of interest in the BMWK. After all, there is no denying that industry needs to be protected from carbon leakage.

The industry is therefore also calling for Germany to take a proactive role. “Appropriate calculation methods, competitiveness in the downstream value chains or relief for exports – all necessities for the chemical industry for which no solutions are in sight,” criticizes Matthias Blum, trade expert of the German Chemical Industry Association (VCI). He demands that the German government lobby Brussels to exempt the chemical and pharmaceutical industry from the CBAM.

Export rebates probably not WTO-compatible

Another way to protect the German export industry would be so-called export rebates. These export rebates could take the form of free CO2 certificates for the number of products exported.

However, this will hardly be possible with the Commission. It had removed such an option from its proposal for the CBAM even before the publication of the Fit for 55 package. The reason: lack of WTO compatibility and the absence of a price signal for the industry to encourage decarbonization. And because the German government itself always stresses the need for WTO compatibility, this option is not on the table in Berlin either. Instead of taking the initiative itself to drive forward solutions for exports, the German government is supporting the Commission’s proposal.

Another option would be the climate clubs announced by the German government itself with Germany’s most important trading partners. Club members could be granted an exemption from the CBAM, allowing companies to export there without a CO2 surcharge. However, such a climate club would only live up to its name if all members actually agreed on climate-friendly production. So far, there is a lack of approaches as to how this could be achieved.

The chemical industry sees the German government as having a duty here: it should focus “as quickly as possible on establishing the climate club announced in the coalition agreement,” says Matthias Blum of the VCI. “Here we are still waiting for substantial impetus.” With Till Hoppe

Switzerland the power island

A study by the Swiss electricity regulator Elcom recently startled the public between Zurich and Geneva: Switzerland could be threatened with 47 hours without electricity every winter from 2025. At least in the most pessimistic scenario calculated in the study. That is, at the end of March, when the lakes and rivers have little water and the demand for electricity is traditionally high.

But that’s not all: the Russian war in Ukraine is now threatening supply bottlenecks for gas as well. Switzerland covers only 15 percent of its energy needs with gas, half of which comes from Russia. However, Switzerland does not have its own gas storage facilities. Hopes of Energy Minister Simonetta Sommaruga that she could benefit from a planned solidarity agreement between Germany and Italy were quickly dashed. The legal basis for bilateral agreements between EU states is the European SoS Regulation. The way is not open for Switzerland as a non-member.

Finance Minister Ueli Maurer, for example, recently traveled to Qatar in a similar fashion to his European counterparts and established contacts there with a view to LNG supplies. However, the looming electricity gap is the bigger challenge for Swiss policymakers in the longer term. In 2020, Switzerland produced 65.5 terawatt hours of electricity, with hydro and nuclear power plants contributing 58 and 33 percent, respectively. In the winter half of the year, Switzerland must import electricity; in the summer, it can export surpluses.

Switzerland has secured nuclear power from France via long-term contracts, but also imports from Germany in the winter half-year. Germany plans to shut down its last nuclear power plants at the end of the year, nuclear power from France has recently been less available due to a series of breakdowns, and the country’s own reactors are also tending to supply less electricity. In 2017, Switzerland decided by referendum that no more new nuclear power plants could be built. The four nuclear power plant units still in operation are to be shut down by 2034 at the latest.

Gas-fired power plants and pumped storage as reserve

How the country can fill the resulting gap, however, is unclear. The electricity regulator Elcom has proposed building two to three gas-fired power plants with a total capacity of 1000 megawatts. However, even before Russia’s attack on Ukraine, Switzerland wanted to become independent of fossil fuels. Energy Minister Simonetta Sommaruga therefore also wants to strengthen security of supply in winter with new reservoirs and create a hydroelectric power reserve for emergencies. Yet, such projects traditionally meet with great resistance in the affected regions.

The risk of a blackout in winter is more acute than ever, Christoph Mäder of the Economiesuisse trade association recently warned. The expansion of renewable energies is making far too little progress. Parts of the business community and the right-wing liberal Swiss FDP are now questioning the nuclear phase-out. However, a new referendum would be needed for an exit from the phase-out, and a renaissance of nuclear energy would have no chance there as things stand today.

It is not only the Swiss energy transition that is unregulated. The unresolved relationship with the EU is also a complicating factor. In May of last year, after eight years, Bern unilaterally broke off negotiations on a new basis for bilateral relations, much to Brussels’ chagrin. A framework agreement was supposed to bring order to the thicket of more than 120 bilateral treaties that Switzerland had used to secure sectoral access to the EU’s single market after voting no to the European Economic Area (EEA). Switzerland would have committed itself to dynamically adapting its previously static agreements to the new EU law. In the event of conflicts, the European Court of Justice in Luxembourg would have had the final say.

Electricity agreement is a long time coming

Without the framework agreement, the EU wants to let this privileged partial membership erode and not conclude any new internal market agreements with Switzerland. An electricity agreement has actually been in the pipeline for years and now remains blocked for the foreseeable future. At stake is not least Switzerland’s historic role as a hub for electricity flows in Europe.

With its pumped storage plants in the Alps, Switzerland would actually be predestined to play the role of Europe’s battery, just like Norway. Instead, Switzerland is now in the process of losing its connection to the EU’s internal electricity market. Elcom has forfeited its observer status with the European regulatory agency Acer, and Swissgrid is fighting for its place with Entso-E, the association of network operators.

The next step is to be excluded from the so-called balancing energy market. This is used to keep the grid stable and to balance it in the event of unplanned power flows. From 2025, Switzerland’s neighboring countries will have to reserve at least 70 percent of cross-border capacities for trading between EU states. Switzerland’s physical connections to the European electricity market will remain in place. But trading and balancing the grid is likely to become more complex and also more expensive for the players. Experts expect losses of up to one billion francs by 2030.

Finland wants to join NATO – Russia announces reaction

In the wake of Russia’s invasion of Ukraine, top Finnish leaders have called for Finland to join NATO. “Finland must immediately apply for NATO membership,” President Sauli Niinistö and Prime Minister Sanna Marin said in a joint statement in Helsinki on Thursday. The Russian government reacted with sharp criticism and announced countermeasures.

Sweden, which has also been neutral up to now, is also expected to express a desire to join because it feels threatened by Russia. The US Department of Defense stated that it is expected Finland and, if necessary, Sweden will also be quickly granted membership in the transatlantic military alliance. This would pave the way for an increased troop presence in Scandinavia already during the one-year ratification period. NATO Secretary-General Jens Stoltenberg said the Finns would receive a “warm welcome.” He promised a “smooth and speedy” accession process.

Chancellor Olaf Scholz had already made it clear last week that Germany supports both countries joining NATO. In an initial statement, Danish Prime Minister Mette Frederiksen also spoke out in favor of rapid accession. The Baltic states in particular are in favor of Finland and Sweden joining NATO because this would make it easier for NATO and EU members Estonia, Latvia and Lithuania to protect themselves from a Russian attack.

Finland has a 1300 kilometer border, in the course of the Second World War there was a Soviet invasion. After World War II, the country remained neutral so as not to strain relations with the then Soviet Union and then Russia. However, as an EU member, Finland, which like Sweden joined the European Union in 1995, is already involved in some joint military structures. Russia had warned Finland against joining NATO. rtr

Gazprom: concern and relief

According to the German side, Russian sanctions against Gazprom Germania paradoxically facilitate the refilling of storage facilities, but mean further political escalation. “Russia is using energy as a weapon,” Economics Minister Robert Habeck said in Berlin on Thursday. However, he said, the country is prepared for this situation. Ten million cubic meters of gas a day would now no longer flow to Germany. This corresponds to three percent of Russian supplies over the rest of the year and can be replaced – albeit at higher prices. This is probably the aim of the sanctions against Gazprom-Germania, which is under German control, and its trading subsidiaries.

Despite presumably higher prices, the Federal Network Agency sees new supply contracts as positive. It will now be easier for Germania’s subsidiaries to fill Rehden, Germany’s largest storage facility, said Klaus Müller, head of the authority. He pointed out that Russia was not sanctioning the pipeline operators under the umbrella of Gazprom Germania, so the gas could continue to flow via Nordstream I, for example, and be distributed in Germany. So Russia apparently wants to continue the trade, he said.

On Wednesday, the Russian government banned business dealings with Gazprom Germania and other former subsidiaries of Russian state-owned Gazprom abroad. The ruling affects a total of 31 companies. Gazprom Germania had been placed under German state control at the beginning of April.

However, another conflict could loom if Russia were to stop accepting euro or dollar payments for gas from the West. Russia had demanded new arrangements with ruble payments, but these are considered unclear. The utility RWE said it was in close contact with the German government on this and expected clarifications shortly. Many bills must be paid in May. Then it will probably become clear whether they will be accepted. rtr/dpa

Commission announces assistance for wheat exports from Ukraine

The EU Commission is offering Ukraine help with wheat exports. “20 million tons of grain must be brought out of Ukraine in less than three months with the help of the EU,” EU Transport Commissioner Adina Valean said Thursday. To that end, a logistics platform should be set up and member states’ storage capacities reviewed. Transport by train poses a challenge because the track width in Ukraine is different from that in Europe.

The wheat would have to be reloaded at the border, but this would not be possible in many places. Furthermore, guarantees for forwarders who send their vehicles to Ukraine are to be examined. The EU Commission also called on member states and companies to provide sufficient personnel and material and to give priority to Ukrainian agricultural export shipments at the terminals.

Ukraine, along with Russia, is considered one of the world’s most important grain suppliers. Since the Russian attack on Ukraine, food security has been threatened in many poor countries, especially in Africa, according to a UN report. rtr

Facilitated aid schemes expire at the end of June

The relaxation of EU rules that allowed member governments to grant more than €3 trillion in state aid to thousands of companies affected by the COVID-19 pandemic over the past two years will end on June 30, EU competition authorities said Thursday.

Of this amount, about €730 billion were actually spent, according to the European Commission. “The improving economic situation in the light of the easing of restrictions is the main reason why we have decided not to extend the Temporary Framework for State Aid beyond June 30, 2022,” Commission Vice President Margrethe Vestager said in a statement.

However, investment support measures will continue until the end of this year and solvency support measures until the end of 2023.

The EU executive said it would consider later this year whether to extend beyond Dec. 31 the eased rules on state aid to help companies affected by sanctions imposed on Russia. rtr

EU wants a greater role in Asian ‘tension field’

European Union leaders said Thursday the EU wants to become a bigger player in Asia, which they described as a “theater of tension.” They warned of an increasingly assertive China, calling on Beijing to defend the multilateral world order.

The call was made at a joint press conference in Tokyo following an EU-Japan summit attended by European Commission President Ursula von der Leyen, European Council President Charles Michel and Japanese Prime Minister Fumio Kishida. A day earlier, Beijing warned the summit not to “badmouth” China.

The trio announced they would continue talks on how to expand their partnership in the fight against Russia over its invasion of Ukraine in areas such as energy and aid, and in a joint statement called for an immediate cessation of hostilities.

However, Michel and von der Leyen also said they were aware of regional tensions in Asia and that the EU wanted – and needed – to play a greater role. “The Indo-Pacific is a thriving region. It is also a theater of tension,” von der Leyen said. “Take the situation in the East and South China Seas and the constant threat from the DPRK (North Korea).”

Both warned against China’s close ties with Russia, calling its actions in Ukraine a “special military operation,” and condemned unilateral efforts to change the status quo in any region of the world. “Our cooperation in Ukraine is crucial, but it is also important in the Indo-Pacific region, and we want to deepen our consultations on a more assertive China,” Michel said. “We believe China must defend the multilateral system from which it has benefited.”

Reluctance to ban oil imports

The meeting came a day after China said that while a strong relationship between the EU and Japan would be beneficial, it should not go too far. “I must stress that the EU-Japan summit is a matter between themselves, but they should not speak ill of China, let alone interfere in China’s internal affairs,” Chinese Foreign Ministry spokesman Zhao Lijian said Wednesday.

Both Michel and von der Leyen welcomed Japan’s participation in measures against Russia, including sanctions. Tokyo has joined the European Union and the Group of Seven in imposing trade sanctions on Russia that limit Moscow’s ability to export oil and gas.

Japan, however, is highly dependent on energy imports, including purchases from Russia. Last week, Kishida said Japan would “in principle” ban Russian oil, but it was more reluctant to divest from some projects. The three officials met in the Japanese capital for an annual conference held online last year because of the COVID-19 pandemic, a day after Finnish Prime Minister Sanna Marin met with Kishida and just hours before Finland announced it would apply to join NATO. rtr

Massive criticism of Johansson child protection proposal

The proposal presented on Wednesday to combat child abuse depictions on the Internet by EU Commissioner for Home Affairs Ylva Johansson (Europe.Table reported) is drawing massive criticism. The Federal Data Protection Commissioner, Ulrich Kelber, announced that, after initial examination, he would advocate “that the regulation does not come in this form”.

Kelber sees the Commission’s plans as threatening the principle of confidentiality of communications and considers the planned regulations to be a deliberate weakening of encrypted communications that “open the door to abuse.” The planned use of so-called artificial intelligence to detect misrepresentations is “very prone to error” and threatens to cause mass suspicions of blameless citizens. The introduction of mandatory age checks and regulations for upload filters, as proposed by Johansson, are also unacceptable in the view of the BfDI.

The Chaos Computer Club also expressed massive reservations about the Johansson proposal. It is ineffective for the stated goal, it says, because it threatens to overburden the investigating authorities and does not even target the real communication channels of the perpetrators. It is also incompatible with European and German fundamental rights when weighed against each other.

The Internet industry association Eco also voiced massive criticism: “In our view, the draft has the potential to create a free pass for state surveillance,” said Alexandra Koch-Skiba, head of eco’s complaints office “This is ineffective and illegal.” What’s primarily lacking, she said, is more staff for investigations and comprehensive law enforcement. The Internet industry is always ready to help in the real fight, according to the offer made to Commissioner Johansson.

The Federal Ministry of the Interior and the Federal Ministry of Justice have so far avoided any comment on the EU proposal, saying that they are still in the review phase of the proposal and do not want to comment on it. In response to inquiries about the fundamental question of whether Internet blocking and filtering obligations on the part of service providers are, in their view, sensible tools in the fight against child abuse depictions, neither ministry was able to respond by the time of going to press. Meanwhile, it is public knowledge that Johansson already raised the issue of her ideas during a visit to Interior Minister Nancy Faeser (SPD) (Europe.Table reported). fst

What’s cooking in Brussels?

Claire Stam

It has become a classic of Brussels politics for legislative texts to be leaked to the press shortly before their official presentation. These “leaks” are a strategy that allows the EU institutions to gauge the current political temperature and make last-minute adjustments just in case – you never know.

“The package was prepared under the leadership of the Directorate-General for Energy in coordination with the other Directorates-General. The von der Leyen cabinet has followed the work closely, which shows how important this package is for the Commission presidency ” notes an observer closely associated with the RePowerEU package.

However, working out the package was difficult: “The work was done frantically. At times we had a black-box phenomenon vis-à-vis the Commission, that is, you didn’t know who exactly was doing what in the Commission,” the observer continues. And he explains, “member states put pressure on the Commission.”

Call for European solar law

An example? On May 4, energy ministers from five EU countries asked the European Commission to propose a European solar law to massively accelerate the expansion of photovoltaics (PV). The letter to Commission President Ursula von der Leyen and “Green Deal” chief Frans Timmermans was signed by ministers from Austria, Belgium, Lithuania, Luxembourg and Spain.

“The EU still has the best PV manufacturing R&D in the world, and given the new technologies, we can rebuild a competitive PV industry in Europe. If the current challenges and market failures of European PV manufacturing are not adequately addressed, the EU risks turning dependence on Russian oil and gas into increasing long-term dependence on raw materials and PV hardware imports from China or other emerging global PV suppliers,” they warn.

As a reminder, according to a summary document, the Commission’s plan to decouple from Russian gas is based on four pillars: saving energy, diversifying energy supply sources, accelerating the green transition, and combining investment with reform. The package is also expected to include a strategy to accelerate the deployment of solar energy in the EU.

International energy strategy and diplomacy

The letter from the five European energy ministers points to another aspect of the package to be unveiled next week: the geopolitical and diplomatic dimension of energy. For in addition to RePowerEU, there is the EIS. That’s European jargon for “European International Strategy” – in plain language, cooperation between the European Union and countries that are outside the Union.

“Behind EIS is the credibility of the European Union on the international stage in terms of energy and climate policy. It’s about strengthening it, giving it more bite again,” explains our observer. The international energy strategy is conceived as a strategic framework for engagement that will shape the EU’s future energy diplomacy and the external dimension of the EU’s Green Deal, he further explains.

Or, to put it another way, what is at stake is that it becomes, as such, a strategic framework for engagement that not only provides tools to respond to the ongoing energy crisis, but rather enables and strengthens the EU’s “Green Deal” objectives – precisely to enhance EU credibility and assertiveness on the international stage. After all, the process that led to the creation of this international energy strategy began with the “Green Deal” Communication issued by Ursula von der Leyen’s self-proclaimed geopolitical European Commission in late 2019.

This was followed by the January 2021 Foreign Affairs Council (FAC) conclusions, a first attempt to translate the goals of the Green Deal into future EU climate and energy diplomacy.

“RePower Ukraine” initiative

Contexte also obtained the document on the new “European energy diplomacy” dictated by the new geopolitical circumstances, with a focus on the need to diversify energy supplies and support Ukraine. Thus, a “RePower Ukraine” initiative is announced for the country’s energy independence.

To replace Russian gas, the Commission is counting in part on gas from other countries, liquefied or not. It also anticipates diversifying energy supplies with nuclear fuels. A comprehensive Mediterranean partnership for green hydrogen and increased cooperation with the Gulf region are also planned.

A “European Hydrogen Facility” already announced in the March 8 communication is confirmed for the end of 2022. And increased cooperation on energy efficiency and renewables is also planned with Africa, the Western Balkans and the Indo-Pacific region.

The Foreign Affairs Council conclusions provided a general framework outlining priorities for shaping European climate and energy diplomacy in line with the EU’s Green Deal objectives.

The strategy should have been published by the end of 2021, but the process was delayed due to the fossil fuel price and supply crisis in 2021 and Russia’s war of aggression in Ukraine.

Schröder on sanctions list?

What else was important this week: the liberal Renew Europe group in the European Parliament confirmed reports that it wants to expand the list of people affected by EU-Russia sanctions to include Europeans who sit on the boards of major Russian companies, including former German Chancellor Gerhard Schröder.

The text, to be voted on in plenary next week, “calls on the Council to extend the list of persons covered by EU sanctions to European members of the boards of major Russian companies, including in particular ex-Chancellor Gerhard Schröder.” Such a step has not yet been proposed by the Union.

At the time of writing, it was still unclear whether the two largest groups in Parliament, the European People’s Party and the Socialists and Democrats – the group which, of course, includes the members of the SPD – would support the draft resolution.