When the German government’s first solar package sees the light of day today, a few light gray clouds will hover over Berlin – at least metaphorically. This is because important parts of the upcoming cabinet decision are subject to subsidies from Brussels.
The remuneration for Agri-PV, i.e. the simultaneous use of agricultural land for photovoltaics, can only be increased as planned once the EU Commission has approved this. Until then, fruit growers, for example, will have to make do with lower surcharges if they want to grow their raspberries under the protection of elevated solar modules. The additional bonus for extensive agri-PV, i.e. when farmers use less nitrogen fertilizer, forgo herbicides and plant flower strips, is also subject to approval.
In view of the manageable changes, however, approval could come quite quickly. The Commission approved the much more extensive EEG 2023 at the end of last year – barely six months after the Bundestag’s decision.
We hope you have a wonderful day!
This Thursday, the Cortes (Congress and Senate) will be constituted and vote on the presidency of Congress. President Pedro Sánchez of the Socialists, who has been in power until now, hopes that the left-wing camp will be able to prevail. The election is considered a yardstick for the formation of a government in the country. But Sánchez needs the help of separatist leader Carles Puigdemont, of all people. And he is currently driving up the price for his support.
Puigdemont and his Junts party have said they will not determine whether they support Sánchez’s alliance with the left-wing Sumar coalition until hours before the vote on the Congress presidency. In doing so, the Catalan separatist leader, who has fled Spanish justice, is increasing the pressure on the socialist.
Junts has imposed silence and discretion on its members regarding the dialogue with Sánchez’s party (PSOE). He did not want to disrupt the negotiations by making public statements that caused speculation, Puigdemont tweeted. Instead, he called for “patience and perseverance”. Meanwhile, the newspaper El Español, referring to senior PSOE members, reported that the Junts party was only “being dramatic” by delaying the announcement until Thursday morning, although the agreement for the election of the Congress presidency had already been reached.
Immediately after the July 23 election, Junts announced it would demand a maximum price for supporting Sánchez. They want an amnesty for all those involved in the Catalan independence referendum of Oct. 1, 2017, which was declared illegal. They also want the right to decide on Catalonia’s independence and the cancellation of the region’s €70 billion in debt. The amnesty is to apply to dozens of Catalan separatists, former officials and individuals accused of, among other things, disobedience, embezzlement of public funds, attacking state authority, manufacturing explosives and terrorism.
A week before the election, Puigdemont had still affirmed that Junts votes would never be used to make Sánchez prime minister again. Sánchez was lying and not keeping his word, Puigdemont accused the leader of the Socialists. For his part, Sánchez had also made it clear before the elections that there would be “no amnesty and no referendum” if he remained in office. Now both could break their election promises.
Although Sánchez stands out as the election winner, the conservative Partido Popular (PP) led by party leader Alberto Núñez Feijóo won the election. However, the Popular Party lacks alliance partners for a majority. Sánchez also declined Feijóo’s invitation to jointly break the political stalemate following the election results. Feijóo wanted to arrange a meeting between the main political forces, PP and PSOE, which won 33 and 31 percent of the vote, respectively.
Instead, Sánchez is apparently grappling with Puigdemont’s demands, because the tone of Sánchez, his ministers and allies in the Sumar coalition indicates that he wants to form a government at any cost. But to do so, he needs Puigdemont’s support. If Sánchez gives in to the demands, his left-wing alliance with the seven Junts deputies would achieve a slim majority of 178 seats – 176 are needed for a majority.
When the US Inflation Reduction Act (IRA) went into effect a year ago, there was a lot of excitement. The subsidy program for the establishment of green industries, initially budgeted at 369 billion dollars, put European manufacturers at a disadvantage and could lead to a trade war and a race for government subsidies, according to fears.
One year after enactment, a mixed IRA record emerges:
However, there are also doubts about these figures, most of which come from climate advocacy groups. “In some cases, investment projects were simply announced again after the IRA went into effect. Some of the investments would probably have been realized even without IRA funding“, Niclas Poitiers, Research Fellow at the think tank Bruegel, tells Table.Media.
Considering the size of the US economy, 170,000 jobs is not much, he says. In some areas, “billions in subsidies are flowing, but very few jobs are being created”. The Bruegel researcher warns of an international subsidy race “at the end of which billions could end up with large companies, but hardly any positive effects are achieved in terms of jobs and really new investments”.
There is more agreement on the climate impacts of the IRA. According to a Science paper, the IRA would contribute to a 43 to 48 percent reduction in emissions in 2035 compared to the 2005 baseline. Without IRA measures, emissions would fall by only 27 to 35 percent. The study is based on nine calculations and shows quite clearly the climate benefits of the subsidy program. Through reduced costs for green technologies, the IRA will also have positive climate impacts in other states, according to Bruegel.
However, a lack of investment in the partly ailing power grid could diminish the impact of the IRA. If the US does not expand energy transmission capacity twice as fast as it has in the past decade, a good half of the IRA’s climate effect could be wiped out, a Princeton University study shows. Meeting US climate goals will require “robust regulations and additional action at the federal and state levels“, according to Jesse Jenkins, an IRA expert at Princeton University. He cites, for example, an earlier coal phase-out and better regulations in the agriculture and forestry sectors. The think tank BloombergNEF had recently cited a CO2 price as an additional measure to complement the IRA.
Poitiers of Bruegel believes more focused subsidies make more sense than the IRA’s watering-can approach: “Building up a Western solar industry doesn’t necessarily result in even one more solar panel being made if it’s just shifting production.” Poitiers instead suggests government investment in infrastructure, such as EV charging stations, or in decarbonizing the steel and cement industries or socially offsetting climate costs.
Nils Redeker, Vice Director of the Jacques Delors Centre for European Policy, tells Table.Media that he also sees a need for more targeted subsidies. The US lags behind China and Europe in the production of green technologies, he said. Redeker also rejects the IRA’s watering-can approach: “For new technologies such as hydrogen or advanced batteries, such subsidies can help build competitive industries. In the case of established mass-produced products such as solar cells, however, the US will hardly be able to catch up with Asian manufacturers.”
He advises Europe not to copy the IRA directly but to “focus on promoting sectors where you already have a foot in the door or where there is still technological development potential”. The next EU Commission must find a better answer to the industrial policy challenge, he said. “In the medium term, we cannot solve the problem through national subsidies alone. To protect the internal market from economic divergence and unfair competition, we need coordination and funding at EU level.” This is a tall order, he said, but one that the EU will definitely have to manage.
In the final stages of the legislative process, the EU institutions are currently still working on defining eligible technologies in the Net-Zero Industry Act (NZIA). The NZIA is intended to be the European answer to the IRA. The Commission also wants to include established goods such as photovoltaics and wind energy. However, the NZIA is repeatedly criticized by the business community and the Parliament. The responsible rapporteur in the European Parliament, Christian Ehler (CDU), for example, criticized that the ambitions of the NZIA and the new financing platform STEP were not in line with the financial resources earmarked for it. The industry does not see the NZIA as equivalent to the IRA.
Meanwhile, how high the cost of the IRA will be in the coming years is still unclear. In fact, analysts at investment bank Goldman Sachs estimate that companies could claim as much as 1.2 trillion dollars in IRA tax benefits and subsidies over the next decade, allowing them to make up to 2.9 trillion dollars in investments. A Brookings study reached similar conclusions. Despite these high costs, the IRA “could be a cost-effective incentive for reducing carbon emissions”, according to the authors. IRA incentives are likely to cost less than 100 dollars per ton of CO2 saved, which is lower than estimated greenhouse gas damages, which range from 100 dollars to 380 dollars per ton, they said.
The originally planned appointment of Fiona Scott Morton as Chief Economist of the Directorate General for Competition (DG COMP) has triggered an intense controversy because of her nationality and the risk of conflicts of interest from her previous functions – antitrust of the Obama administration, consultant for Apple and Microsoft. Polemics aside, it is important to underline a little-mentioned problem affecting DG COMP: the full lack of results in the field of digitization and technology of this “state within a state” within the European Commission, which has been going on for more than 20 years.
Their failures lie at various levels. There is, for example, the lack of impact of their decisions on the emergence of gigantic digital monopolies. Of the €25 billion in fines over the past 15 years, only about €3.5 billion were actually paid (less than 1.5 percent of GAFAMs* net profit in 2022 alone). The market capitalization of the seven largest tech companies is eleven trillion US dollars, of which four trillion will be added in 2022 alone. This raises the question of how effective DG COMP is for the market and European citizens.
Another reason for this failure could be the composition of DG COMP. It is estimated that almost 80 percent of the officials are lawyers and have no real experience in the sectors they are supposed to regulate. However, an understanding of the scientific or technological background is crucial in the 21st century – to evaluate the relevance of the investigations launched and to anticipate what will really harm healthy competition.
Two examples where Brussels saw almost nothing: The approval of the €19 billion acquisition of WhatsApp by Facebook, where DG COMP considered that “WhatsApp and Facebook Messenger are not competitors” (sic). Since then, Meta (formerly Facebook) has remained the massive market leader in instant messaging.
Another example is the approval of Google’s acquisition of Deepmind in 2014. The British start-up had a turnover of only a few tens of millions of pounds and was therefore not the subject of an in-depth investigation. But Deepmind was where an estimated one-third of Europe’s best AI talent was concentrated. So this acquisition did much more to cripple AI competition in Europe than any other transaction.
Nevertheless, the power gained by Facebook and Google as a result has by no means led to any questioning at DG COMP. At the same time, it is clear that Europe urgently needs to update its industrial and competition policy, which has come to a standstill in the last century.
Further evidence of this is the lack so far of tangible results from the “missions” in the research area, the IPCEIs in the industrial area or our inability to find a powerful response to the Inflation Reduction Act. The EU and DG COMP urgently need a Chief Scientist or a Chief Strategist, rather than another Chief Economist.
Over the past 15 years, GDP per capita in the USA has grown 60 percent faster than in the EU (in Switzerland even about 75 percent faster). And the poorest state in the US (Mississippi) has a per capita GDP similar to Germany and higher than France. It is crucial for the future of our democracies that we fundamentally change institutions that today no longer guarantee a better future for their citizens.
DG COMP bears a clear responsibility for Europe’s overall technological decline, in all areas: Digital, Artificial Intelligence, Semiconductors, Cloud, Space, Cyber. No European company – with the exception of LVMH – is among the top 20 most valuable companies in the world. The rules of competition draw on 20th century economic concepts (market share, reference market) without taking into account the key success factors of the 21st century such as network effects, talent acquisition or scaling.
If we do not want Europeans to give in to populism, we must have a strategic vision of European technology leadership. We must strengthen the scientific competence of politics and institutions. We must stop making grand announcements without consequences and measure the effectiveness of political decisions.
Finally, we must also rediscover the joy of challenge and progress and give citizens, entrepreneurs and civil society much more confidence. A fundamental reform of DG COMP is a central building block for a European industrial and innovation strategy for the technological 21st century.
*GAFAMs: Google (Alphabet), Amazon, Facebook (Meta), Apple and Microsoft.
When the German government’s first solar package sees the light of day today, a few light gray clouds will hover over Berlin – at least metaphorically. This is because important parts of the upcoming cabinet decision are subject to subsidies from Brussels.
The remuneration for Agri-PV, i.e. the simultaneous use of agricultural land for photovoltaics, can only be increased as planned once the EU Commission has approved this. Until then, fruit growers, for example, will have to make do with lower surcharges if they want to grow their raspberries under the protection of elevated solar modules. The additional bonus for extensive agri-PV, i.e. when farmers use less nitrogen fertilizer, forgo herbicides and plant flower strips, is also subject to approval.
In view of the manageable changes, however, approval could come quite quickly. The Commission approved the much more extensive EEG 2023 at the end of last year – barely six months after the Bundestag’s decision.
We hope you have a wonderful day!
This Thursday, the Cortes (Congress and Senate) will be constituted and vote on the presidency of Congress. President Pedro Sánchez of the Socialists, who has been in power until now, hopes that the left-wing camp will be able to prevail. The election is considered a yardstick for the formation of a government in the country. But Sánchez needs the help of separatist leader Carles Puigdemont, of all people. And he is currently driving up the price for his support.
Puigdemont and his Junts party have said they will not determine whether they support Sánchez’s alliance with the left-wing Sumar coalition until hours before the vote on the Congress presidency. In doing so, the Catalan separatist leader, who has fled Spanish justice, is increasing the pressure on the socialist.
Junts has imposed silence and discretion on its members regarding the dialogue with Sánchez’s party (PSOE). He did not want to disrupt the negotiations by making public statements that caused speculation, Puigdemont tweeted. Instead, he called for “patience and perseverance”. Meanwhile, the newspaper El Español, referring to senior PSOE members, reported that the Junts party was only “being dramatic” by delaying the announcement until Thursday morning, although the agreement for the election of the Congress presidency had already been reached.
Immediately after the July 23 election, Junts announced it would demand a maximum price for supporting Sánchez. They want an amnesty for all those involved in the Catalan independence referendum of Oct. 1, 2017, which was declared illegal. They also want the right to decide on Catalonia’s independence and the cancellation of the region’s €70 billion in debt. The amnesty is to apply to dozens of Catalan separatists, former officials and individuals accused of, among other things, disobedience, embezzlement of public funds, attacking state authority, manufacturing explosives and terrorism.
A week before the election, Puigdemont had still affirmed that Junts votes would never be used to make Sánchez prime minister again. Sánchez was lying and not keeping his word, Puigdemont accused the leader of the Socialists. For his part, Sánchez had also made it clear before the elections that there would be “no amnesty and no referendum” if he remained in office. Now both could break their election promises.
Although Sánchez stands out as the election winner, the conservative Partido Popular (PP) led by party leader Alberto Núñez Feijóo won the election. However, the Popular Party lacks alliance partners for a majority. Sánchez also declined Feijóo’s invitation to jointly break the political stalemate following the election results. Feijóo wanted to arrange a meeting between the main political forces, PP and PSOE, which won 33 and 31 percent of the vote, respectively.
Instead, Sánchez is apparently grappling with Puigdemont’s demands, because the tone of Sánchez, his ministers and allies in the Sumar coalition indicates that he wants to form a government at any cost. But to do so, he needs Puigdemont’s support. If Sánchez gives in to the demands, his left-wing alliance with the seven Junts deputies would achieve a slim majority of 178 seats – 176 are needed for a majority.
When the US Inflation Reduction Act (IRA) went into effect a year ago, there was a lot of excitement. The subsidy program for the establishment of green industries, initially budgeted at 369 billion dollars, put European manufacturers at a disadvantage and could lead to a trade war and a race for government subsidies, according to fears.
One year after enactment, a mixed IRA record emerges:
However, there are also doubts about these figures, most of which come from climate advocacy groups. “In some cases, investment projects were simply announced again after the IRA went into effect. Some of the investments would probably have been realized even without IRA funding“, Niclas Poitiers, Research Fellow at the think tank Bruegel, tells Table.Media.
Considering the size of the US economy, 170,000 jobs is not much, he says. In some areas, “billions in subsidies are flowing, but very few jobs are being created”. The Bruegel researcher warns of an international subsidy race “at the end of which billions could end up with large companies, but hardly any positive effects are achieved in terms of jobs and really new investments”.
There is more agreement on the climate impacts of the IRA. According to a Science paper, the IRA would contribute to a 43 to 48 percent reduction in emissions in 2035 compared to the 2005 baseline. Without IRA measures, emissions would fall by only 27 to 35 percent. The study is based on nine calculations and shows quite clearly the climate benefits of the subsidy program. Through reduced costs for green technologies, the IRA will also have positive climate impacts in other states, according to Bruegel.
However, a lack of investment in the partly ailing power grid could diminish the impact of the IRA. If the US does not expand energy transmission capacity twice as fast as it has in the past decade, a good half of the IRA’s climate effect could be wiped out, a Princeton University study shows. Meeting US climate goals will require “robust regulations and additional action at the federal and state levels“, according to Jesse Jenkins, an IRA expert at Princeton University. He cites, for example, an earlier coal phase-out and better regulations in the agriculture and forestry sectors. The think tank BloombergNEF had recently cited a CO2 price as an additional measure to complement the IRA.
Poitiers of Bruegel believes more focused subsidies make more sense than the IRA’s watering-can approach: “Building up a Western solar industry doesn’t necessarily result in even one more solar panel being made if it’s just shifting production.” Poitiers instead suggests government investment in infrastructure, such as EV charging stations, or in decarbonizing the steel and cement industries or socially offsetting climate costs.
Nils Redeker, Vice Director of the Jacques Delors Centre for European Policy, tells Table.Media that he also sees a need for more targeted subsidies. The US lags behind China and Europe in the production of green technologies, he said. Redeker also rejects the IRA’s watering-can approach: “For new technologies such as hydrogen or advanced batteries, such subsidies can help build competitive industries. In the case of established mass-produced products such as solar cells, however, the US will hardly be able to catch up with Asian manufacturers.”
He advises Europe not to copy the IRA directly but to “focus on promoting sectors where you already have a foot in the door or where there is still technological development potential”. The next EU Commission must find a better answer to the industrial policy challenge, he said. “In the medium term, we cannot solve the problem through national subsidies alone. To protect the internal market from economic divergence and unfair competition, we need coordination and funding at EU level.” This is a tall order, he said, but one that the EU will definitely have to manage.
In the final stages of the legislative process, the EU institutions are currently still working on defining eligible technologies in the Net-Zero Industry Act (NZIA). The NZIA is intended to be the European answer to the IRA. The Commission also wants to include established goods such as photovoltaics and wind energy. However, the NZIA is repeatedly criticized by the business community and the Parliament. The responsible rapporteur in the European Parliament, Christian Ehler (CDU), for example, criticized that the ambitions of the NZIA and the new financing platform STEP were not in line with the financial resources earmarked for it. The industry does not see the NZIA as equivalent to the IRA.
Meanwhile, how high the cost of the IRA will be in the coming years is still unclear. In fact, analysts at investment bank Goldman Sachs estimate that companies could claim as much as 1.2 trillion dollars in IRA tax benefits and subsidies over the next decade, allowing them to make up to 2.9 trillion dollars in investments. A Brookings study reached similar conclusions. Despite these high costs, the IRA “could be a cost-effective incentive for reducing carbon emissions”, according to the authors. IRA incentives are likely to cost less than 100 dollars per ton of CO2 saved, which is lower than estimated greenhouse gas damages, which range from 100 dollars to 380 dollars per ton, they said.
The originally planned appointment of Fiona Scott Morton as Chief Economist of the Directorate General for Competition (DG COMP) has triggered an intense controversy because of her nationality and the risk of conflicts of interest from her previous functions – antitrust of the Obama administration, consultant for Apple and Microsoft. Polemics aside, it is important to underline a little-mentioned problem affecting DG COMP: the full lack of results in the field of digitization and technology of this “state within a state” within the European Commission, which has been going on for more than 20 years.
Their failures lie at various levels. There is, for example, the lack of impact of their decisions on the emergence of gigantic digital monopolies. Of the €25 billion in fines over the past 15 years, only about €3.5 billion were actually paid (less than 1.5 percent of GAFAMs* net profit in 2022 alone). The market capitalization of the seven largest tech companies is eleven trillion US dollars, of which four trillion will be added in 2022 alone. This raises the question of how effective DG COMP is for the market and European citizens.
Another reason for this failure could be the composition of DG COMP. It is estimated that almost 80 percent of the officials are lawyers and have no real experience in the sectors they are supposed to regulate. However, an understanding of the scientific or technological background is crucial in the 21st century – to evaluate the relevance of the investigations launched and to anticipate what will really harm healthy competition.
Two examples where Brussels saw almost nothing: The approval of the €19 billion acquisition of WhatsApp by Facebook, where DG COMP considered that “WhatsApp and Facebook Messenger are not competitors” (sic). Since then, Meta (formerly Facebook) has remained the massive market leader in instant messaging.
Another example is the approval of Google’s acquisition of Deepmind in 2014. The British start-up had a turnover of only a few tens of millions of pounds and was therefore not the subject of an in-depth investigation. But Deepmind was where an estimated one-third of Europe’s best AI talent was concentrated. So this acquisition did much more to cripple AI competition in Europe than any other transaction.
Nevertheless, the power gained by Facebook and Google as a result has by no means led to any questioning at DG COMP. At the same time, it is clear that Europe urgently needs to update its industrial and competition policy, which has come to a standstill in the last century.
Further evidence of this is the lack so far of tangible results from the “missions” in the research area, the IPCEIs in the industrial area or our inability to find a powerful response to the Inflation Reduction Act. The EU and DG COMP urgently need a Chief Scientist or a Chief Strategist, rather than another Chief Economist.
Over the past 15 years, GDP per capita in the USA has grown 60 percent faster than in the EU (in Switzerland even about 75 percent faster). And the poorest state in the US (Mississippi) has a per capita GDP similar to Germany and higher than France. It is crucial for the future of our democracies that we fundamentally change institutions that today no longer guarantee a better future for their citizens.
DG COMP bears a clear responsibility for Europe’s overall technological decline, in all areas: Digital, Artificial Intelligence, Semiconductors, Cloud, Space, Cyber. No European company – with the exception of LVMH – is among the top 20 most valuable companies in the world. The rules of competition draw on 20th century economic concepts (market share, reference market) without taking into account the key success factors of the 21st century such as network effects, talent acquisition or scaling.
If we do not want Europeans to give in to populism, we must have a strategic vision of European technology leadership. We must strengthen the scientific competence of politics and institutions. We must stop making grand announcements without consequences and measure the effectiveness of political decisions.
Finally, we must also rediscover the joy of challenge and progress and give citizens, entrepreneurs and civil society much more confidence. A fundamental reform of DG COMP is a central building block for a European industrial and innovation strategy for the technological 21st century.
*GAFAMs: Google (Alphabet), Amazon, Facebook (Meta), Apple and Microsoft.
