Social taxonomy + Lithium mining in Saxo • Table.Briefings

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The discussion about the green EU taxonomy is in full swing, now the next taxonomy project could cause conflicts. The expert group “Platform on Sustainable Finance” will present its final report on the social categorization of economic activities this month. The EU Commission must then decide how to deal with the suggestions on the social taxonomy. The experts are expected to propose a dual categorization. “Sounds complicated? It is,” as Silke Wettach reports.

125,000 tons of lithium – a raw material that is urgently needed to achieve the climate targets of the Green Deal – are presumably located on the German side of the Zinnwald in the Ore Mountains. Mining is scheduled to begin in 2025. Unlike in Spain, in Saxony, there are hardly any protests from the population against the mining plans. Nevertheless, it is a project with hurdles, as Christian Domke-Seidel reports. And one about which those responsible are currently persistently silent.

German policy in the conflict with Russia has been sharply criticized for weeks, especially in the US but also in other European countries. The German government is seen as an unreliable fellow in the Western camp, above all its social democratic part. This image seems to have solidified to such an extent that it has so far gone unnoticed that this is no longer the case. SPD Chairman Lars Klingbeil has brought his party into line – and thus straightened out the West’s front against Vladimir Putin for the time being, as Till Hoppe analyzes.

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Sarah Schaefer

Social taxonomy: Is a new dispute looming?

The green taxonomy is followed by the social taxonomy: Although the paper of the expert group “Platform on Sustainable Finance” is a non-binding document, some industries fear that it could lead to preliminary decisions. The EU Commission must then decide how to deal with the suggestions.

The final report is likely to look quite similar to the interim report from last summer. In it, the group, with its total of 57 members from companies, associations, civil society, and regulatory authorities, had proposed a dual categorization. First, there is a vertical subdivision that would differentiate products according to their social harm or benefit. Accordingly, infrastructure such as water supply or education would be beneficial, while tobacco would not. On a horizontal scale, the company’s behavior would be assessed, regardless of its product, such as working conditions and attitude toward consumers.

Sounds complicated? It is, especially since there are no scientific criteria for all these criteria – unlike the green taxonomy. International standards such as the Universal Declaration of Human Rights, the UN’s Sustainable Development Goals, and the EU’s Social Pillar could be used.

Some industries fear disadvantages

Antje Schneeweiß, a German from the Working Group of Church Investors, leading subgroup 4, which essentially wrote the report. Schneeweiß, who has been involved in sustainable investment for 30 years, was contacted by lobbyists early on – with the goal to obtain the “sustainable social” label for certain industries. “The first letter from the defense industry came as early as January last year,” Schneeweiß says. The industry argues that access to capital would become more difficult if it were not listed as social. Industries such as textiles and leather also fear disadvantages from the social taxonomy.

Other companies hope to benefit from the new categorization, such as medical technology and safety company Draeger. “We expect the social taxonomy to have a positive effect,” a spokeswoman told Europe.Table. The publicly traded company makes breathing apparatus and protective suits for firefighters and police. The green taxonomy has not yet offered any categories with which the company could have distinguished itself.

Insurers: complete green taxonomy first

The EU Commission had asked for reactions on the social taxonomy until last September. As the expert report is not an official Commission document, this was not a formal consultation process. The Commission has not yet published the feedback, but individual groups share their analysis.

The association of European insurers, Insurance Europe, warns, for example, that it is likely to be difficult to agree on common social goals in the EU, as these are strongly influenced by the national context. The association also advocates completing the green taxonomy first – this is more urgent given the climate crisis.

The International Capitals Market Association (ICMA), an association of European banks and service providers, stresses in its statement that a well-done social taxonomy could provide guidance for sustainable bonds but less so for equities and other investment products. ICMA also points out how difficult vertical grading could become because the exact circumstances would have to be taken into account. For example, in the case of road construction, it would depend on the precise location. Potentially, they promoted economic inclusion. Their damage to the climate would depend on their use. Silke Wettach

Lithium mining in Saxony: silence in Zinnwald

Saxony could become a mainstay of the European Green Deal. The Ore Mountains are home to enormous lithium reserves. But the preparation for mining is extremely cost-intensive, and the vein will probably have to be shared with competitors from the Czech Republic. Protests do not overshadow the project.

One of the biggest problems of lithium mining in Zinnwald, Saxony, can be admired in a visitor’s gallery. Mining has a long tradition in the area. It dates back to the 13th century and is part of the UNESCO World Heritage Site. But if you enter the gallery less than three kilometers underground, you suddenly find yourself on the border with the Czech Republic. Because raw materials don’t care about maps, there is also a lot of interest in the lithium deposit on the Czech side.

In the neighboring country, the government has put its money where its mouth is. Although the Australian mining company European Metals had started exploration there, it had to establish the subsidiary Geomet s.r.o. for production together with the semi-state-owned Czech energy supplier CEZ. The Australians own only 49 percent of the company. Prime Minister Andrej Babiš did not want to lose the lucrative lithium mining to a foreign company.

A company’s turbulent years

On the Saxon side, Deutsche Lithium has been awarded the mining contract. The company has gone through turbulent years. A decade ago, the Solarworld Group started lithium exploration on-site and subsequently founded Solicium GmbH. Because the company ran into economic difficulties, it partnered with Bacanora Minerals from Canada. Later, Solarworld went bankrupt but remained a partner in Solicium. Only the newly founded Zinnwald Lithium PLC from London bought Solarworld out and took over the shares of the Canadians.

The problems are not surprising. Until the first kilogram of lithium can finally be extracted from the ground, investments of around €150 million are necessary, as Deutsche Lithium calculated to the “Sächsische Zeitung” as recently as spring 2021. A year earlier, CEO Armin Müller told “Deutschlandfunk” that there was enough lithium in Zinnwald to build batteries for around 20 million EVs – according to the company, there are 125,000 tons of lithium on the German side of the Zinnwald and another 250,000 tons on the Czech side.

But since these interviews, it has been difficult to obtain reliable statements. The company does not want to answer any questions at the moment and justifies this with the change of shareholders. The responsible mayor in Freiberg also does not want to comment, nor does the Saxon state government.

Lithium has become a political issue

Only Bernhard Cramer, Chief Mining Officer at the Saxon Mining Authority, comments to Europe.Table, albeit in general terms: “The approval of the mining law framework operating plan for the extraction of lithium submitted by Deutsche Lithium GmbH is being processed.” There is no further information. The Chief Mining Authority is “exclusively performing its duties as a licensing and supervisory authority”.

The silence in Zinnwald is no surprise. Lithium has long since become a political issue in Europe. The element is considered a critical raw material in Europe for achieving climate goals under the Green Deal. Lithium is the most important material for building large batteries. With the further processing of the material, battery, and electric car factories, an entire value chain is to be created that is independent of CO2-intensive imports from China and South America.

Lithium mining in Spain shows what can happen when federal and local governments push ahead without sufficient citizen participation. Given the interference with nature, local residents are protesting loudly against planned mines. In Saxony, there was hardly any of that. Because of the mining tradition in the region, people are rather positive about the project. Only at the beginning did concerns arise about noise and traffic pollution, but these were quickly dispelled.

Establishment of an integrated and sustainable value chain

However, the approval procedures are complex. Green Anna Cavazzini, chair of the Internal Market and Consumer Protection Committee, comes from Saxony. She stresses that lithium plays a crucial role in climate goals but also says: “At the same time, the energy and transport turnaround must not lead to new mining projects in Germany or elsewhere in the world simply being waved through quickly.” The “highest possible environmental and social standards must always apply“.

In addition, an integrated and sustainable value chain – as called for by Cavazzini and the Greens – does not yet exist in Germany. Its development is currently being promoted by the EU’s Horizon 2020 research framework program. Results must be delivered as quickly as possible; otherwise, it will be difficult to mine lithium profitably in Saxony.

The market is competitive. Not only because of competition from Spain and the Czech Republic. Lithium is also soon to be mined in the Upper Rhine region. The EU has sourced 98 percent of its critical raw materials from China until now. The deposits there are large, labor is cheap and environmental regulations are nowhere near as big a cost factor as in Europe. Christian Domke-Seidel

European Court of Auditors calls for improvements in energy taxation

Current tax rates for different energy sources do not reflect the extent of pollution caused by their use. That’s the conclusion of an analysis by the European Court of Auditors published Monday. While energy taxes could help combat climate change by providing incentives for utilities to switch to renewable energy, the Court said, they do not reflect the extent of pollution caused by fossil fuels. But fossil fuel subsidies have barely declined over the past decade, it says. As a result, the relative cost of renewables has risen, and the energy transition is being delayed.

EU countries subsidize fossil fuels to the tune of more than €55 billion a year, even though the Commission and some member states have said they will end this. A total of 15 member states actually spend more money on fossil fuels than on renewables in the form of subsidies, including France, Belgium, and Finland. This, they say, is done through tax exemptions or reductions, direct subsidies, and state aid. This would undermine the effectiveness of CO2 pricing, the authors argue.

The main challenge now is to link regulatory and financial measures more closely and find the right mix of the two elements, says Viorel Ştefan, one of the European Court of Auditors’ auditors. The EU’s current energy taxation directive allows energy sources that have a greater impact on the environment to be treated more favorably in terms of taxation than CO2-efficient energy sources, the analysis says. According to the report, coal is taxed at €2.90 per megawatt-hour, natural gas at €7/MWh, and electricity at €32.10/MWh.

Different CO2 prices lead to market distortion

In addition, there are differences in the national taxation of emissions. It is true that 14 EU countries levy CO2 taxes on certain sectors outside the European emissions trading scheme – comparable to the German Fuel Emissions Trading Act (BEHG). However, the amount of tax per ton of CO2 emitted differs in each country, which can lead to distortions of the internal market, according to analysts at the European Court of Auditors.

For example, Sweden has a CO2 price of €108.80 per ton for the heat and transport sectors, while in Poland, the ton of CO2 for industry outside the ETS is taxed at just ten cents. In Germany, the BEHG CO2 price has increased from €25 to €30 per ton at the beginning of 2022.

The authors, therefore, call for a uniform treatment of sectors and energy carriers in the energy taxation directive and the reduction of subsidies for fossil fuels in order to achieve the goals of the Green Deal. However, this requires the unanimity of all member states, which, according to the analysts, is likely to be the key institutional challenge for the EU. luk

DSA: Confidence determines the start of the trilogue

The first political trilogue on the Digital Services Act (DSA) lasted just under an hour yesterday afternoon. Representatives from the Commission, the French Council Presidency, and the European Parliament reiterated their priorities and officially launched the interinstitutional negotiations. The atmosphere was amicable and, given the different positions, almost a bit too confident, reported a member of the parliamentary negotiating team. All three institutions agreed on one point: The negotiations were characterized by time pressure, but this should not be at the expense of quality. Following the trilogue, Competition Commissioner Margrethe Vestager praised in a tweet the “strong alignment” that existed between the Commission, Council, and Parliament on the objectives for the DSA.

On Wednesday, the negotiations will continue at the technical level. The first step will be to define the politically particularly sensitive points. Further negotiations are planned for Monday and Thursday next week, before another political trilogue is to take place on February 15.

The non-profit organization Hate Aid, together with 20 partner organizations, used the trilogue kick-off to raise awareness for more ambitious complaint mechanisms in the case of digital violence against women: It presented rapporteur Christel Schaldemose (S&D) with a petition signed by over 30,000 people. The central demand: Platforms should be held more accountable in the fight against digital violence. This is a clear and strong signal that more needs to be done to ensure a safe and fair internet, Schaldemose said. koj

EU Commission investigates complaint against DB Cargo

The European Commission is investigating possible unjustified advantages of Deutsche Bahn subsidiary DB Cargo over competitors. The Commission has received a complaint from a competitor and has launched an in-depth investigation, the authority said. Among other things, the investigation is looking into whether the parent company is bearing the losses of freight railroad DB Cargo and whether the freight subsidiary is benefiting from favorable services offered by the parent company.

It is also being investigated whether loans could be taken out particularly cheaply. The background is that Deutsche Bahn, as a state-owned company, has a particularly high credit rating and can therefore borrow more cheaply than many others. DB Cargo has a market share of just under 50 percent in Germany.

The Network of European Railways (NEE), the association of competitors, praised the investigation: “We have repeatedly heard from our members about offers from DB Cargo that are incomprehensible in terms of price, and we are looking forward to the result of the investigation with eager anticipation,” said NEE head Ludolf Kerkeling. He added that it was important that market mechanisms were not overridden even in a state-owned company. Deutsche Bahn replied: “The fact is: DB Cargo AG has not received any subsidies that distort competition.”

The German government is repeatedly criticized because, on the one hand, it wants to promote competition on the railroads and, on the other, as the owner of Deutsche Bahn, it has to represent its interests. The Federal Audit Office also points to this tension. rtr

Inquiry report criticizes lockdown parties in Downing Street

Pressure is mounting on British Prime Minister Boris Johnson over numerous parties during the COVID-19 lockdowns. Some of the events at his Downing Street official residence should not have taken place, while others got out of hand, top official Sue Gray wrote in her interim report published Monday. She attested to severe leadership failures and a lack of judgment by the British government. “I am sorry,” Johnson told the British Parliament. “I understand the anger that people feel.” But now, he said, it is necessary to get back to work.

More and more parties had become known during the COVID-19 lockdowns in recent weeks. In the face of sharp criticism, including from within his own ranks, Johnson had played for time and declared that he would first wait for the Gray report. But because of parallel running police investigations, this was not published now completely.

Suitcase full of alcohol

Nevertheless, the published passages contain some political dynamite. For example, Gray called for clear rules that prevent binge drinking in the workplace. “The excessive consumption of alcohol is not appropriate at any time in a professional workplace.” Media reports in recent weeks had chronicled drinking bouts in which government employees had hauled suitcases full of alcohol and danced until the early hours. Meanwhile, strict COVID-19 contact restrictions were in place in the UK, so relatives could not attend funerals, for example.

Gray also noted that employees felt pressured. Some had wanted to voice concerns but had shied away from doing so. Government employees need to be able to criticize improper behavior, Gray wrote. rtr

Takeover of chip supplier Siltronic on the brink of failure

The billion-euro sale of Munich chip supplier Siltronic to Taiwan is apparently on the brink of being shelved for political reasons. Talks between Economics State Secretary Udo Philipp and the CEO of Taiwanese wafer manufacturer Global Wafers, Doris Hsu, remained without result, as three insiders told the Reuters news agency. Previously, there had been radio silence for weeks.

The ministry of Robert Habeck (Greens) could torpedo the €4.35 billion takeover by Global Wafers by simply letting the deadline for clearance under the Foreign Trade and Payments Act, expiring this Tuesday night, pass. It would be by far the largest takeover by a foreign company that a German government could allow to fail under the law.

A spokeswoman for the Federal Ministry of Economics said yesterday that the review was still ongoing. Under takeover regulations, clearance must be obtained by January 31; the deadline under the Foreign Trade and Payments Act is until the end of February. Under the law, the German government can ban German companies from selling outside the EU if it sees “key technologies” at risk. This includes the chip industry, to which wafer manufacturers supply the silicon wafers on which semiconductors are produced.

The chip emergency in the COVID pandemic had shown how dependent Europe is on Asian suppliers. Siltronic is the only one from Europe among the five largest silicon wafer manufacturers. The EU Commission plans to present its “Chips Act” this month and support the industry with double-digit billion sums. rtr

CAP: now it’s up to the member states

By Martin Haeusling

Martin Haeusling is a Green MEP and shadow rapporteur on CAP reform.

The EU agricultural reform should have been a game changer, helping to achieve the Green Deal targets. But the reform of the Common Agricultural Policy (CAP), which was adopted by the EU last year, has not earned this name. What we see here is the exact opposite of an improvement. The promised system change is not visible, even if both conservatives and the EU Commission like to present it that way. Instead, the chance for meaningful change for climate, biodiversity, and small farmers has been wasted.

The path of this “reform” was a long one. In the end, we see an agreement with minimal ambition – partly with some steps backwards. The targets for environmental and climate protection have been reduced to a minimum and may be further watered down by crediting measures that barely have an impact on climate or environmental protection, such as precision agriculture.

While the old CAP requires that every farm forfeits up to 30 percent of payments if it fails to comply with environmental regulations, farms will soon be able to decide whether they prefer to farm intensively and legally continue to pollute the climate, water, and soil and contribute to the extinction of certain species, or whether the application of eco-schemes is economically viable for them. So it is foreseeable that intensively farmed problem regions, in particular, will remain problematic.

Comparability between member states becomes more difficult

The increased flexibility for member states has also blown holes into the CAP. A generally applicable, binding CAP with basic requirements will thus not exist in Europe between 2023 and 2027. It is therefore now up to the member states to what extent they will implement a fairer and greener agricultural national policy through their strategic plans. A particular risk here is the “race to the bottom”. This also makes comparability between member states much more difficult than before – this provides the perfect opportunity for further delaying tactics by unambitious member states.

But how exactly will the new CAP look after 2023? While member states have to offer these so-called eco-schemes, i.e., measures that benefit the environment, climate, or animal welfare in CAP’s first pillar, it is not mandatory for farmers. However, there will not be a uniform list of measures that ensures environmental effects. Everything depends on how the Commission evaluates the proposals on eco-schemes.

In terms of conditionality, there have been several steps backwards compared to the previous regulation (cross-compliance). The urgently overdue protection of wetlands and peatlands will only apply as of 2025, with the new CAP running until 2027 – this is completely out of date, especially in the middle of climate change. And once again, the demand for a four-rotation crop rotation with legumes has been completely has been left out of important regulations on crop rotation. In fact, even corn monocultures continue to be legal. Member states also have the ability to further water down the regulations, for example, by exempting farms with a grassland share of 75 percent from any crop rotation requirement.

Lower budget slows climate and environmental ambitions

Regarding the preservation of non-productive landscape elements to increase biodiversity, only 4 percent of arable land is to be reserved for landscape elements or remain unused. This already weak regulation can be stretched further if legumes and other catch crops are cultivated. To put this in perspective, 3.2 percent of Germany’s land is already landscape elements. Studies show that it would take at least 10 percent of well-connected unused land to stop the loss of biodiversity.

In the second pillar, climate and environmental ambitions are primarily slowed down by the lower budget. Although the reform allocates 35 percent of the Pillar 2 funds for environmental measures, up to 50 percent can be used to support disadvantaged areas. This means that there is less money available overall to promote measures with a strong impact on the environment.

A race to impose the weakest environmental regulations can therefore be expected with this reform. Currently, national strategy plans are being submitted to the EU Commission. The Commission then has three months to evaluate these plans. We will be closely monitoring whether the EU Commission checks whether these national strategy plans are compatible with the Green Deal. If it doesn’t, then the Green Deal will be nothing more than empty promises in agriculture.

In Germany, the previous government drew up the national strategic plan. This left the new government, with its green Ministry of Agriculture, little room for maneuver. The most important thing for the German government now is to use its options to correct and further develop national measures in the current funding period. Finally, the next essential step for the current German government is to prepare the next CAP reform. The coalition agreement already stated that, after 2027, direct payments will finally be systematically replaced by awarding climate and environmental benefits.

It is not often that US senators or international media are interested in intra-party discussions in Germany. But how representatives of the SPD position themselves in the conflict with Russia has become a real political issue. “Germany is reeling from the first crisis of the post-Merkel era,” wrote the Financial Times.

Leading SPD politicians such as Kevin Kühnert and Christine Lambrecht have contributed to the impression with their statements on Nord Stream 2 that Germany is an unreliable fellow in the Western camp under the new government. The soft spot in the deterrence policy toward Vladimir Putin. The image seems to have solidified to such an extent that, at least abroad, it has so far gone unrecognized: It is no longer true.

It was not so much Olaf Scholz who straightened out the front, even though the SPD chancellor clarified after (too) long silence: In the event of a Russian attack on Ukraine, Germany will support all sanctions agreed upon by the US and the EU. It was Lars Klingbeil who put the SPD in line, at least according to leading Social Democrats. And he did so even before yesterday’s closed meeting of the SPD leadership.

The new co-chairman of the party made clear last week in the Bundestag: “If the territorial integrity of Ukraine is attacked, then there is a clear, consistent, and decisive response, which this federal government has coordinated with its international partners.” The government rejects arms deliveries to Ukraine, but all sanctions options are on the table. In other words: also an end to Nord Stream 2.

It took a little while for the Social Democrats to get themselves sorted out. Too long, given the acute crisis. It backfired that the party did not resolve the contradictions in its attitude toward Moscow and Nord Stream 2 sooner. Now, however, that seems to have happened, at least for the time being. That should be noted abroad as well. Till Hoppe

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