Gasoline rebate + CBAM agreement + DSA: • Table.Briefings

Dear reader,

At yesterday’s meeting in Brussels, the EU finance ministers agreed on a common approach to dealing with the rapidly rising energy prices resulting from the Ukraine crisis. The focus is on relieving the burden on citizens and companies with rebates, subsidies, and energy independence from Russia. Eric Bonse has taken a look at the measures.

Agreement has also been reached on the general direction of the Carbon Boundary Adjustment Mechanism (CBAM). The member states largely support greater centralization of the CBAM administration. For example, the reporting registry is to be located at EU level and not with the member states. However, some important points still need to be clarified, such as how to deal with exports. Lukas Scheid explains where things are still stuck.

Conversely, there was hardly any progress on the regular agenda items of the Digital Services Act. These concerned the requirements for online marketplace operators and the issue of regulating so-called deepfakes. However, another point yielded a surprise – read more about this in the News.

Today’s Profile is about Florian Drücke, Chairman of the Board of the German Music Industry Association (BVMI). He started at the BMVI in 2006, at a time when the music industry was facing major challenges. Helping to shape framework conditions, leading discussions, giving the creative industries a voice – that’s what spurs the Heidelberg native on.

Your
Lisa-Martina Klein

Gasoline rebate: Lindner plays a bold game in Brussels

By

Eric Bonse

The EU wants to cushion the rapidly rising energy prices and other negative consequences of the Ukraine war for citizens and businesses. A common strategy has been agreed upon, said Bruno Le Maire (France), President-in-Office of the Council, after a meeting of EU finance ministers in Brussels.

This strategy is to rest on three pillars:

1. financial support for all households – for example, a fuel rebate, as is also being discussed in Germany.

2. targeted aid for particularly hard-hit companies. State-guaranteed loans or subsidies are being considered here.

3. “energy independence” – through the gradual withdrawal of gas and oil from Russia, but also through the expansion of renewable energies.

No resolutions were passed. The strategy is first to be worked out in more detail – with the help of the EU Commission, which was given several work assignments. For example, Competition Commissioner Margrethe Vestager is to draw up state aid rules specifically tailored to the energy crisis.

The aim is to provide “rapid, targeted and temporary assistance”, said German Finance Minister Christian Lindner (FDP). This could include the controversial fuel rebate. Other proposals, such as a reduction in value-added tax, had little chance of success, Lindner said, referring to the debate in the ECOFIN Council.

Le Maire had explicitly spoken out against tax cuts and promoted the “French model” of the fuel rebate, Lindner said. The French government had announced a “remise” of 15 cents per liter of gasoline over the weekend. This support measure is to begin on April 1 and last four months. “Anyone who fills up with 60 liters will save €9,” explained Prime Minister Jean Castex.

Lindner wants fixed crisis rebate

Lindner is pursuing similar plans. A “fixed crisis rebate” could amount to 30 or 40 cents, he said Monday evening on ZDF’s “Heute journal”. It could be granted quickly and unbureaucratically and would also not conflict with the strict EU rules on taxation. In addition, a distortion of the market would be avoided because the “price signal” at the gas pump would remain.

The German debate on tax cuts is “at odds” with discussions in the EU, Lindner stressed on Tuesday after his consultations in Brussels. In fact, the minister is in good company from a European perspective. Alongside France, Belgium has just also decided in favor of a fuel rebate.

On Monday, the federal government in Brussels agreed on a package of measures that should secure savings of €300 a year for each household – including a lower VAT on gas. The agreement also provides for a discount on gasoline and diesel of 17.5 cents per liter.

€6.6 billion government subsidy

The situation is quite different in Germany – where Lindner appears isolated. Both the Social Democrats and the Greens are up in arms against the planned gasoline rebate. “I would have liked the federal finance minister to join us in the coalition and the government in putting forward a coordinated proposal,” said SPD parliamentary group leader Wolf Mützenich in Berlin.

Finance and economics ministers would first have to clarify whether gasoline prices were not also a case of market manipulation because there was no change in the supply situation, Mützenich demanded. A relief package would also have to be socially balanced. This is particularly important for the SPD.

The Social Democrats, however, avoided shooting down Lindner’s push. Chancellor Olaf Scholz said they would discuss financial support measures “where it is helpful and necessary”. This would be discussed in parallel with the normal budget, which is to be approved by the federal cabinet on Wednesday. A government subsidy of 40 cents per liter for three months would cost the state about €6.6 billion. That is significantly more than Belgium and France are estimating for this support measure.

ECOFIN CBAM agreement with major gaps

By

Lukas Knigge

The European Union’s Economic and Financial Affairs Council (ECOFIN) largely agreed on the French Presidency’s compromise proposal, published last week (Europe.Table reported). To be sure, some member states still had unanswered questions and called for further analysis and impact assessments through the introduction of the CBAM. However, nearly all ministers or their representatives appeared eager to set the general direction of the Council. The CBAM is seen as a central part of the Fit for 55 package and the strategy for decarbonizing industry.

For example, the member states favored greater centralization of the CBAM administration. The reporting register for importers into the EU is not to be the responsibility of the member states, but centrally at EU level. The Council also foresees a lower limit for the validity of the CBAM. Imports with a value of less than €150 are to be exempt from the CO2 limit levy. The list of sectors affected by the CBAM has not been extended compared to the Commission proposal.

Poland does not support CBAM alignment

Only Poland stated that it would not support the text. Warsaw wants the dossier to be negotiated together with the ETS reform, as the introduction of the CBAM would be accompanied by the gradual phase-down of free emission allowances for industry. Poland wants to prevent this, as it would mean that industrial sectors covered by the CBAM would have to buy CO2 allowances on the ETS. They fear a competitive disadvantage for European products and do not want to reduce free allocations until “it has been sufficiently proven that the CBAM protects against carbon leakage”.

However, this is likely to cause problems with WTO trade rules: EU producers would have a trade advantage if they continued to receive free allowances, while importers would have to pay border adjustment.

Other countries also stressed the need for further discussion on the question of when and how quickly free allocations should be scaled down – as well as on the question of how CBAM revenues should be used. But continuing discussions were postponed to future ministerial meetings from the environment portfolio and are not part of yesterday’s agreement. The annex to the general approach also refers to necessary agreements on other dossiers that are linked to CBAM but not part of the CBAM legislative text – most notably ETS reform.

For example, German Finance Minister Christian Lindner (FDP) called for the role of free certificates to be “adjusted” for future negotiations. He did not elaborate on what this adjustment should look like. In addition, Lindner stressed the need to embed the CBAM in the concept of “open and cooperative climate clubs” as Chancellor Olaf Scholz would like to establish them during the G7 presidency.

‘Too little focus on achieving climate targets in industry’

Despite the lack of clarification of all open issues, the agreement is causing criticism from industry and environmental organizations – but for entirely different reasons. “What we needed today was a clear commitment to a rapid end to free allocation so that we could finally get some speed into the industrial transformation,” says Anne Gläser, carbon pricing officer at Germanwatch. The Council’s position does not pay enough attention to the achievement of climate targets in industry and could trigger problematic counter-reactions in trading partner countries due to the lack of cooperation offers.

Gläser calls for free allocations to be reduced more quickly. The Commission had proposed phasing in the CBAM over ten years starting in 2026, while free allocations would be scaled down at the same rate and volume each time. According to Gläser, this pace would have to be doubled.

The German Steel Federation (WV Stahl) fears for precisely those free allowances. From the steel industry’s point of view, the “untested border adjustment, which is fraught with considerable risks, must first be tested over a sufficiently long period until 2030 and the free allocation maintained for that long,” says Hans Jürgen Kerkhoff, President of WV Stahl.

Carbon leakage protection for exports still unresolved

The question of how to deal with exports also remains open. Finland, Croatia, and Slovakia called on the Commission to present an impact assessment for the export industry when the CBAM is introduced. The CBAM does provide for a border levy on imports from third countries to compensate for the competitive disadvantage of the EU economy caused by rising CO2 prices on the ETS. But how disadvantages for European exporters in global competition are to be prevented has not been clarified.

The steel industry’s turnover from exports accounts for just under 20 percent of total sales. This is the result of an analysis by Prognos AG on behalf of WV Stahl. Without corresponding export protection by the CBAM, European production would only take place for the domestic market, it is said – the reduction of production capacities would be the consequence. Green steel would also have no export prospects as a result, the authors predict.

Economic Affairs Commissioner Paolo Gentiloni, on the other hand, welcomes the Council’s compromise. However, the Commission will have to wait until the first reading in the EU Parliament has also been carried out before giving an official assessment of the Council of Ministers’ position. Negotiations are still ongoing in the Parliament between the rapporteurs for the ETS reform (Peter Liese, EPP) and the CBAM (Mohammed Chahim, S&D). As soon as the Parliament has reached an agreement on both dossiers, the negotiations between the institutions can also start.

DSA: Vestager wants Big Tech to pay for monitoring

During the second trilogue on the Digital Services Act (DSA), Parliament, the Council, and the Commission discussed some of the DSA’s major issues yesterday. However, the big surprise was not directly on the trilogue agenda: EU Vice President Margrethe Vestager wants to impose the costs for the monitoring of the very large platforms on them. Vestager brought up the so-called polluter pays principle for the DSA to MEPs and representatives of the French Council Presidency. According to this principle, monitoring costs are imposed on those who are affected by regulation.

This would provide a mechanism for the Commission, which is to be primarily responsible for the expected complex supervision of very large online platforms (VLOPS), to refinance the necessary increase. Comparable mechanisms also exist in banking supervision, for example.

According to participant circles, the requirements for online marketplace operators and the issue of regulating so-called deepfakes were among the topics discussed during work on the proposals to date. Consent discrepancies, known as dark patterns, were also the subject of the discussions. The European Parliament’s Committee on the Internal Market is holding an expert hearing on these today, Wednesday.

Other topics included whether very large search engines (VLOSE) should be subject to special regulations, a wish of the Council, and the question of a particularly high level of data protection for minors, as requested by the EP.

Little progress – next round to take place soon

No major progress was made in the second round of political negotiations either. Only the question of consumer compensation in the event of DSA violations showed the first signs of agreement.

In the presence of the French Minister of Digital Affairs, Cedric O, it was once again evident that the current Council Presidency attaches importance to a quick adoption. At the same time, however, almost all important questions are still unanswered. These are now to be backed up by compromise proposals from the staff level in the coming weeks, and the EU Commission is also to actively contribute with proposed solutions to contentious issues.

Exactly when the next round of negotiations at the political level is to take place is currently still open, planned so far for 04.04.2022 – and thus shortly before the Easter break. By then, at the latest, the first compromises on the contentious issues of the DSA should become apparent. fst

BSI warns against Kaspersky

The German Federal Office for Information Security (BSI) has issued a warning against antivirus solutions from the Russian vendor Kaspersky. The reason for this is the Russian Federation’s ongoing war in Ukraine. The BSI considers it possible that Kaspersky could cooperate with Russian security authorities on its own initiative or even against its will or be misused by them for their own purposes. This would cast doubt on the manufacturer’s reliability.

Antivirus solutions are particularly problematic because they have to be deeply integrated into the systems to perform their tasks and monitor all running processes and data traffic, which theoretically means they can also spy on or manipulate them. According to the BSI, users should switch to other solutions but avoid a knee-jerk reaction, as switching off antivirus software without a replacement could make it more difficult to fend off attacks from the network.

The IT industry association Bitkom pointed out that it is not permitted to make any recommendations. However, companies should “definitely review their IT security measures and adjust them where necessary”.

Kaspersky rejected the BSI’s account. The company has no ties to the Russian government. The company is working with the BSI to address the concerns. The BSI’s decision was politically motivated and not based on a technical evaluation of the antivirus software. Malicious or suspicious files from German users would be processed in data centers in Zurich. Upon request, customers would be able to view the source code of the software used, among other things.

In the USA, the use of Kaspersky applications has been prohibited since 2017. The reason for this was the Trump administration’s assessment that Kaspersky was too close to the Kremlin. fst/rtr

Intel: mega-fab for Magdeburg

The US corporation Intel is building its new chip factory in Magdeburg. €17 billion will be invested in the construction of two semiconductor plants, Intel CEO Pat Gelsinger announced Tuesday. “It will be the largest investment in the history of Saxony-Anhalt,” said Minister President Reiner Haseloff (CDU). The capital of Saxony-Anhalt beat out Dresden, where Bosch, Infineon, and Globalfoundries already have semiconductor sites, and Penzing in Bavaria. Federal Economics Minister Robert Habeck (Greens) spoke of an important boost in difficult times.

Intel is on an expansion course in the midst of the current chip crisis, particularly affecting car companies and technology firms. The company wants to build a new research center in France and invest in Italy, Poland, Spain, and Ireland, where Intel operates its only European fab to date. In the future, all steps from design to production and assembly are to take place in Europe.

According to Gelsinger, Intel also wants to serve orders from other companies, especially in Ireland, and thus increasingly compete with the largest global contract manufacturers, TSMC and Samsung. A total of €33 billion is to be invested in Europe initially. Over the next ten years, that figure is expected to rise to €80 billion. Intel is already building a production facility in Ohio, initially for $20 billion, and recently bought the chip manufacturer Tower Semiconductor from Israel for $5.4 billion.

Chipan settlements are heavily subsidized

Intel originally wanted to announce the location decisions at the end of 2021 but then waited for the starting signal for the “European Chips Act” at the beginning of February, which is to clear the way for subsidies worth billions. EU Industry Commissioner Thierry Breton called Intel’s announcement the “first visible result” of the effort, with more to follow. TSMC of Taiwan and Samsung of South Korea have also expressed interest. Currently, more than two-thirds of all modern semiconductors are manufactured in Asia. The EU Commission and the US, where work is also underway on a billion-dollar Chips Act, want to change this. German Chancellor Olaf Scholz expressed corresponding hopes: “The first production facility of its kind in the EU will help rebalance global silicon capacities and build a more resilient supply chain.”

Germany likely lured Intel with high subsidies. Even when asked, Minister President Haseloff did not want to give concrete figures. In the race with other locations, Magdeburg’s large area in the Eulenberg industrial park in the southwest of the city, its proximity to Berlin, and the availability of skilled workers were arguments in its favor. Chip factories also require a large amount of water and electricity capacity. These are available in Magdeburg with the Elbe River and the Wolmirstedt high-voltage line node for cheap wind power from northern Germany.

First chips from the Börde not until 2027

Intel announced that it would initially create 3,000 high-tech jobs in Magdeburg. The US company already employs around 10,000 people in several European countries. Despite the pace that all sides want to set, it is likely to be some time before the first Intel chips are built in Germany. Construction is scheduled to start in the first half of 2023, with production to begin four years later. In time for the expected start of construction, the European Chips Act could thus also be ready, which Parliament and the Council have yet to discuss. rtr/fst

ENVI: revision of ETS Market Stability Reserve adopted

As the first dossier of the Fit for 55 package, the revision of the Market Stability Reserve (MSR) has cleared the hurdle of the parliamentary committee. On Tuesday, MEPs in the Committee on the Environment, Public Health and Food Safety (ENVI) Committee voted by a majority in favor of the report by Maltese Social Democrat Cyrus Engerer, after first voting on some amendments.

The MSR revision is part of the reform of the EU Emissions Trading Scheme (ETS). It is designed to protect the ETS from market shocks while removing surplus allowances from the market without directly canceling them. The Commission’s proposal for the MSR revision calls for 24 percent of allowances available on the market to be transferred to the reserve by 2023. After that, the share would drop to 12 percent.

The ENVI report includes extending the period in which the 24 percent applies to 2030. It also calls for the minimum number of allowances in the MSR to be increased from 100 million to 200 million. This is intended to prevent an excessive surplus of available allowances and send a price signal to enable “cost-effective greenhouse gas emission reductions” for sectors affected by the ETS, the report says. MEPs also call on the Commission to monitor the impact of the reserve and keep it operational in case of future unforeseen external market shocks.

A stable ETS is crucial in these unprecedented times, said rapporteur Engerer. The MSR offers emissions trading the opportunity to adapt to the dynamic needs of the market. It is also designed to prevent economic crises, such as during the COVID-19 pandemic, and to better protect businesses and consumers from excessive prices.

65 deputies ultimately voted in favor of the report, with 20 votes against and one abstention. The report is to be submitted to the plenum for a vote in the first week of the April session. luk

Taxonomy: EU advisers propose additional category for sustainable investments

European Union advisers recommend adding another category to the controversial taxonomy used to classify sustainable investments in the EU. An amber classification could identify forms of energy that are still needed as a transitional solution on the road to climate neutrality, EU adviser Nathan Fabian told the environment and economics committees in the European Parliament on Tuesday.

Despite sharp criticism from many countries, the EU Commission intends to stick to its plans to award an eco-label to nuclear power and natural gas, at least under certain criteria. The so-called taxonomy is intended to channel financial flows specifically into sustainable technologies. Some EU countries see gas as a bridge to climate neutrality because it produces fewer CO2 emissions than oil and coal. Critics of nuclear power complain about radioactive waste, which is why this form of energy cannot be sustainable.

Fabian stressed, however, that the commission’s plans are not compatible with the 1.5-degree target because they allow too high emissions from the use of gas. This would send a signal to the market that a technology that emits more CO2 than the average energy mix is sustainable. rtr/luk

Gas crisis: Liberals miss interim targets

Liberals in the European Parliament have called on the Commission to quickly present a more precise timetable for greater independence from Russian gas imports. “What are the necessary goals and milestones to be achieved in the coming weeks and months?” asked Czech MEP Martina Dlabajová (Renew) in the Industry Committee on Tuesday. Energy Commissioner Kadri Simson presented the REPowerEU strategy to MEPs there, which outlines a framework for security of supply next winter and long-term measures until 2030. Commission President Ursula von der Leyen has announced the next steps for the end of March.

Liberals question the Commission’s estimate that the EU could obtain 50 billion cubic meters (bcm) of liquefied natural gas (LNG) from alternative sources within the next year. “On what basis did you calculate the 50 bcm,” Dlabajová wanted to know. She sees obstacles in the global availability of LNG tankers and liquefaction capacity for natural gas.

Political groups demand price cap

Faced with increased gas, electricity, and fuel prices, MEPs from several political groups called for price caps. Energy prices should be frozen at September levels, said Belgian Marc Botenga (Left), suggesting that harmonized minimum rates for energy taxes be dispensed with across Europe and that tax rates be left entirely to the member states. The right-wing Identity and Democracy group also called for considering price limits.

“Monitor the electricity market and put forward strict rules to prevent this profiteering,” said Romanian Dan Nica of the Social Democrats, addressing the Commission. Nica referred to competition law in the telecommunications sector without formulating a precise proposal. The electricity market regulator ACER plans to present a report soon with ways to further develop the market design for electricity.

So far, however, no one has put forward proposals for a better design, Simson countered. The rules for the electricity market must stimulate investment in renewable energies, curb price fluctuations and protect consumers. ber

China resells US gas to Europe

China has supplied liquefied natural gas (LNG) from the United States to Europe. Unipec, the trading arm of China’s state-owned oil and gas company Sinopec, resold three shipments to ports in Europe and turned a profit, Bloomberg reports.

The resale of gas to Europe reveals the impact of high energy prices on global trade flows. This is because China is now the largest importer of LNG gas. The People’s Republic’s gas demand is also rising. LNG is expected to play a greater role in the medium term to reduce coal consumption and achieve the People’s Republic’s climate targets.

Last week, natural gas prices in Europe rose to a new high. The cause is uncertain supplies from Russia. The price increase prompted Unipec traders to turn away from the lower-priced Chinese market, according to Bloomberg. This is particularly surprising given that Beijing had recently ordered importers to secure imports of energy commodities and food (China.Table reported). nib

Florian Drücke: the voice of the music industry

Florian Drücke ist seit 2017 Vorstandsvorsitzender des Bundesverbandes Musikindustrie. — Florian Drücke has been Chairman of the Board of the German Music Industry Association since 2017

Of course, it was a great honor for Florian Drücke (47) to receive a knighthood from the French Minister of Culture. But the Chairman of the German Music Industry Association (BVMI) and Co-President of the Franco-German Cultural Council had one request. That the ceremony please be held in his home town of Heidelberg, instead of at the French Embassy on Pariser Platz in Berlin, as is usually the case. “I think that many things are much better and more stringent when told on a small scale. Anything else would have seemed a bit disconnected to me in that respect.”

Staying grounded and helping to shape change: Two basic motifs of Drücke’s career. He started as in-house counsel at BVMI in 2006, at a time when the music industry was in the throes of a swan song. CD revenues were plummeting, net piracy was in full bloom, the MP3 format’s copying capabilities were unleashing their full power, and many peer-to-peer sharing users hated the music industry. But 2006 was also the year Spotify was founded. It was clear to Drücke early on that a major process was getting underway here, at the end of which copyright and monetization of content would be significantly different.

Meanwhile, the music industry has reinvented itself. Audio streaming was its mainstay in 2021, accounting for 68 percent of sales. “Helping to shape the framework, leading discussions about how to get there – that’s what’s kept me involved all these years.” Particularly exciting for Drücke in this regard: The music industry always takes on a pioneering role. This is one of the reasons why fundamental issues are often discussed here, such as algorithms, filters, and liability issues.

Drücke has changed the BVMI image

As chairman of the BVMI, Drücke accompanies these processes as a representative of the music companies: “There is always translation work behind it. How can I explain what is totally difficult from a legal point of view? How can I explain how the industry works, i.e., the big picture?”. Drücke is experienced in moderating interests to be able to work out common lines. Creativity plays a major role here; Drücke draws on his deep understanding of the complicated mechanisms of the music industry in discussions. In the meantime, the association has refrained from overly aggressive campaigns against end-users, appealing more often to solidarity with artists.

Drücke is very aware that spamigation has damaged the industry’s reputation – even if it could be considered economically successful. Instead, the association is focusing more on the question of who earns money on the Internet: platform operators like Spotify, Apple, or Amazon – or the music industry and thus perhaps also the creatives? Time and again, the question arises as to who should receive what share of the revenue pie and whether algorithms ensure unfair distribution in the process. And how illegal content is regulated on platforms and by hosting providers is an ongoing issue for Drücke, even beyond the Digital Services Act.

What will he be focusing on in the future? First of all, working to ensure that the creative industries in Germany are understood as a separate branch of the economy. During the years of the pandemic crisis, he saw things moving in the right direction, especially with the k3d initiative, in which everyone from architects to magazine publishers pulled together. But a government contact person for the creative industries has still not emerged, despite all the assurances that there is an urgent need for action here.

The debate about European copyright, on the other hand, is now on the home stretch, after a run-up of twenty years. However, by opting for a special path, the previous German government made a choice that will make cooperation more difficult for partners in the European digital single market. According to Drücke, it is all the more important to communicate the next steps of innovation now to be sustainably positioned in the future. In other words, what has been his day-to-day business for just over fifteen years. Julius Schwarzwälder

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,

At yesterday’s meeting in Brussels, the EU finance ministers agreed on a common approach to dealing with the rapidly rising energy prices resulting from the Ukraine crisis. The focus is on relieving the burden on citizens and companies with rebates, subsidies, and energy independence from Russia. Eric Bonse has taken a look at the measures.

Agreement has also been reached on the general direction of the Carbon Boundary Adjustment Mechanism (CBAM). The member states largely support greater centralization of the CBAM administration. For example, the reporting registry is to be located at EU level and not with the member states. However, some important points still need to be clarified, such as how to deal with exports. Lukas Scheid explains where things are still stuck.

Conversely, there was hardly any progress on the regular agenda items of the Digital Services Act. These concerned the requirements for online marketplace operators and the issue of regulating so-called deepfakes. However, another point yielded a surprise – read more about this in the News.

Today’s Profile is about Florian Drücke, Chairman of the Board of the German Music Industry Association (BVMI). He started at the BMVI in 2006, at a time when the music industry was facing major challenges. Helping to shape framework conditions, leading discussions, giving the creative industries a voice – that’s what spurs the Heidelberg native on.

Your
Lisa-Martina Klein

Gasoline rebate: Lindner plays a bold game in Brussels

By

Eric Bonse

The EU wants to cushion the rapidly rising energy prices and other negative consequences of the Ukraine war for citizens and businesses. A common strategy has been agreed upon, said Bruno Le Maire (France), President-in-Office of the Council, after a meeting of EU finance ministers in Brussels.

This strategy is to rest on three pillars:

1. financial support for all households – for example, a fuel rebate, as is also being discussed in Germany.

2. targeted aid for particularly hard-hit companies. State-guaranteed loans or subsidies are being considered here.

3. “energy independence” – through the gradual withdrawal of gas and oil from Russia, but also through the expansion of renewable energies.

No resolutions were passed. The strategy is first to be worked out in more detail – with the help of the EU Commission, which was given several work assignments. For example, Competition Commissioner Margrethe Vestager is to draw up state aid rules specifically tailored to the energy crisis.

The aim is to provide “rapid, targeted and temporary assistance”, said German Finance Minister Christian Lindner (FDP). This could include the controversial fuel rebate. Other proposals, such as a reduction in value-added tax, had little chance of success, Lindner said, referring to the debate in the ECOFIN Council.

Le Maire had explicitly spoken out against tax cuts and promoted the “French model” of the fuel rebate, Lindner said. The French government had announced a “remise” of 15 cents per liter of gasoline over the weekend. This support measure is to begin on April 1 and last four months. “Anyone who fills up with 60 liters will save €9,” explained Prime Minister Jean Castex.

Lindner wants fixed crisis rebate

Lindner is pursuing similar plans. A “fixed crisis rebate” could amount to 30 or 40 cents, he said Monday evening on ZDF’s “Heute journal”. It could be granted quickly and unbureaucratically and would also not conflict with the strict EU rules on taxation. In addition, a distortion of the market would be avoided because the “price signal” at the gas pump would remain.

The German debate on tax cuts is “at odds” with discussions in the EU, Lindner stressed on Tuesday after his consultations in Brussels. In fact, the minister is in good company from a European perspective. Alongside France, Belgium has just also decided in favor of a fuel rebate.

On Monday, the federal government in Brussels agreed on a package of measures that should secure savings of €300 a year for each household – including a lower VAT on gas. The agreement also provides for a discount on gasoline and diesel of 17.5 cents per liter.

€6.6 billion government subsidy

The situation is quite different in Germany – where Lindner appears isolated. Both the Social Democrats and the Greens are up in arms against the planned gasoline rebate. “I would have liked the federal finance minister to join us in the coalition and the government in putting forward a coordinated proposal,” said SPD parliamentary group leader Wolf Mützenich in Berlin.

Finance and economics ministers would first have to clarify whether gasoline prices were not also a case of market manipulation because there was no change in the supply situation, Mützenich demanded. A relief package would also have to be socially balanced. This is particularly important for the SPD.

The Social Democrats, however, avoided shooting down Lindner’s push. Chancellor Olaf Scholz said they would discuss financial support measures “where it is helpful and necessary”. This would be discussed in parallel with the normal budget, which is to be approved by the federal cabinet on Wednesday. A government subsidy of 40 cents per liter for three months would cost the state about €6.6 billion. That is significantly more than Belgium and France are estimating for this support measure.

ECOFIN CBAM agreement with major gaps

By

Lukas Knigge

The European Union’s Economic and Financial Affairs Council (ECOFIN) largely agreed on the French Presidency’s compromise proposal, published last week (Europe.Table reported). To be sure, some member states still had unanswered questions and called for further analysis and impact assessments through the introduction of the CBAM. However, nearly all ministers or their representatives appeared eager to set the general direction of the Council. The CBAM is seen as a central part of the Fit for 55 package and the strategy for decarbonizing industry.

For example, the member states favored greater centralization of the CBAM administration. The reporting register for importers into the EU is not to be the responsibility of the member states, but centrally at EU level. The Council also foresees a lower limit for the validity of the CBAM. Imports with a value of less than €150 are to be exempt from the CO2 limit levy. The list of sectors affected by the CBAM has not been extended compared to the Commission proposal.

Poland does not support CBAM alignment

Only Poland stated that it would not support the text. Warsaw wants the dossier to be negotiated together with the ETS reform, as the introduction of the CBAM would be accompanied by the gradual phase-down of free emission allowances for industry. Poland wants to prevent this, as it would mean that industrial sectors covered by the CBAM would have to buy CO2 allowances on the ETS. They fear a competitive disadvantage for European products and do not want to reduce free allocations until “it has been sufficiently proven that the CBAM protects against carbon leakage”.

However, this is likely to cause problems with WTO trade rules: EU producers would have a trade advantage if they continued to receive free allowances, while importers would have to pay border adjustment.

Other countries also stressed the need for further discussion on the question of when and how quickly free allocations should be scaled down – as well as on the question of how CBAM revenues should be used. But continuing discussions were postponed to future ministerial meetings from the environment portfolio and are not part of yesterday’s agreement. The annex to the general approach also refers to necessary agreements on other dossiers that are linked to CBAM but not part of the CBAM legislative text – most notably ETS reform.

For example, German Finance Minister Christian Lindner (FDP) called for the role of free certificates to be “adjusted” for future negotiations. He did not elaborate on what this adjustment should look like. In addition, Lindner stressed the need to embed the CBAM in the concept of “open and cooperative climate clubs” as Chancellor Olaf Scholz would like to establish them during the G7 presidency.

‘Too little focus on achieving climate targets in industry’

Despite the lack of clarification of all open issues, the agreement is causing criticism from industry and environmental organizations – but for entirely different reasons. “What we needed today was a clear commitment to a rapid end to free allocation so that we could finally get some speed into the industrial transformation,” says Anne Gläser, carbon pricing officer at Germanwatch. The Council’s position does not pay enough attention to the achievement of climate targets in industry and could trigger problematic counter-reactions in trading partner countries due to the lack of cooperation offers.

Gläser calls for free allocations to be reduced more quickly. The Commission had proposed phasing in the CBAM over ten years starting in 2026, while free allocations would be scaled down at the same rate and volume each time. According to Gläser, this pace would have to be doubled.

The German Steel Federation (WV Stahl) fears for precisely those free allowances. From the steel industry’s point of view, the “untested border adjustment, which is fraught with considerable risks, must first be tested over a sufficiently long period until 2030 and the free allocation maintained for that long,” says Hans Jürgen Kerkhoff, President of WV Stahl.

Carbon leakage protection for exports still unresolved

The question of how to deal with exports also remains open. Finland, Croatia, and Slovakia called on the Commission to present an impact assessment for the export industry when the CBAM is introduced. The CBAM does provide for a border levy on imports from third countries to compensate for the competitive disadvantage of the EU economy caused by rising CO2 prices on the ETS. But how disadvantages for European exporters in global competition are to be prevented has not been clarified.

The steel industry’s turnover from exports accounts for just under 20 percent of total sales. This is the result of an analysis by Prognos AG on behalf of WV Stahl. Without corresponding export protection by the CBAM, European production would only take place for the domestic market, it is said – the reduction of production capacities would be the consequence. Green steel would also have no export prospects as a result, the authors predict.

Economic Affairs Commissioner Paolo Gentiloni, on the other hand, welcomes the Council’s compromise. However, the Commission will have to wait until the first reading in the EU Parliament has also been carried out before giving an official assessment of the Council of Ministers’ position. Negotiations are still ongoing in the Parliament between the rapporteurs for the ETS reform (Peter Liese, EPP) and the CBAM (Mohammed Chahim, S&D). As soon as the Parliament has reached an agreement on both dossiers, the negotiations between the institutions can also start.

DSA: Vestager wants Big Tech to pay for monitoring

During the second trilogue on the Digital Services Act (DSA), Parliament, the Council, and the Commission discussed some of the DSA’s major issues yesterday. However, the big surprise was not directly on the trilogue agenda: EU Vice President Margrethe Vestager wants to impose the costs for the monitoring of the very large platforms on them. Vestager brought up the so-called polluter pays principle for the DSA to MEPs and representatives of the French Council Presidency. According to this principle, monitoring costs are imposed on those who are affected by regulation.

This would provide a mechanism for the Commission, which is to be primarily responsible for the expected complex supervision of very large online platforms (VLOPS), to refinance the necessary increase. Comparable mechanisms also exist in banking supervision, for example.

According to participant circles, the requirements for online marketplace operators and the issue of regulating so-called deepfakes were among the topics discussed during work on the proposals to date. Consent discrepancies, known as dark patterns, were also the subject of the discussions. The European Parliament’s Committee on the Internal Market is holding an expert hearing on these today, Wednesday.

Other topics included whether very large search engines (VLOSE) should be subject to special regulations, a wish of the Council, and the question of a particularly high level of data protection for minors, as requested by the EP.

Little progress – next round to take place soon

No major progress was made in the second round of political negotiations either. Only the question of consumer compensation in the event of DSA violations showed the first signs of agreement.

In the presence of the French Minister of Digital Affairs, Cedric O, it was once again evident that the current Council Presidency attaches importance to a quick adoption. At the same time, however, almost all important questions are still unanswered. These are now to be backed up by compromise proposals from the staff level in the coming weeks, and the EU Commission is also to actively contribute with proposed solutions to contentious issues.

Exactly when the next round of negotiations at the political level is to take place is currently still open, planned so far for 04.04.2022 – and thus shortly before the Easter break. By then, at the latest, the first compromises on the contentious issues of the DSA should become apparent. fst

BSI warns against Kaspersky

The German Federal Office for Information Security (BSI) has issued a warning against antivirus solutions from the Russian vendor Kaspersky. The reason for this is the Russian Federation’s ongoing war in Ukraine. The BSI considers it possible that Kaspersky could cooperate with Russian security authorities on its own initiative or even against its will or be misused by them for their own purposes. This would cast doubt on the manufacturer’s reliability.

Antivirus solutions are particularly problematic because they have to be deeply integrated into the systems to perform their tasks and monitor all running processes and data traffic, which theoretically means they can also spy on or manipulate them. According to the BSI, users should switch to other solutions but avoid a knee-jerk reaction, as switching off antivirus software without a replacement could make it more difficult to fend off attacks from the network.

The IT industry association Bitkom pointed out that it is not permitted to make any recommendations. However, companies should “definitely review their IT security measures and adjust them where necessary”.

Kaspersky rejected the BSI’s account. The company has no ties to the Russian government. The company is working with the BSI to address the concerns. The BSI’s decision was politically motivated and not based on a technical evaluation of the antivirus software. Malicious or suspicious files from German users would be processed in data centers in Zurich. Upon request, customers would be able to view the source code of the software used, among other things.

In the USA, the use of Kaspersky applications has been prohibited since 2017. The reason for this was the Trump administration’s assessment that Kaspersky was too close to the Kremlin. fst/rtr

Intel: mega-fab for Magdeburg

The US corporation Intel is building its new chip factory in Magdeburg. €17 billion will be invested in the construction of two semiconductor plants, Intel CEO Pat Gelsinger announced Tuesday. “It will be the largest investment in the history of Saxony-Anhalt,” said Minister President Reiner Haseloff (CDU). The capital of Saxony-Anhalt beat out Dresden, where Bosch, Infineon, and Globalfoundries already have semiconductor sites, and Penzing in Bavaria. Federal Economics Minister Robert Habeck (Greens) spoke of an important boost in difficult times.

Intel is on an expansion course in the midst of the current chip crisis, particularly affecting car companies and technology firms. The company wants to build a new research center in France and invest in Italy, Poland, Spain, and Ireland, where Intel operates its only European fab to date. In the future, all steps from design to production and assembly are to take place in Europe.

According to Gelsinger, Intel also wants to serve orders from other companies, especially in Ireland, and thus increasingly compete with the largest global contract manufacturers, TSMC and Samsung. A total of €33 billion is to be invested in Europe initially. Over the next ten years, that figure is expected to rise to €80 billion. Intel is already building a production facility in Ohio, initially for $20 billion, and recently bought the chip manufacturer Tower Semiconductor from Israel for $5.4 billion.

Chipan settlements are heavily subsidized

Intel originally wanted to announce the location decisions at the end of 2021 but then waited for the starting signal for the “European Chips Act” at the beginning of February, which is to clear the way for subsidies worth billions. EU Industry Commissioner Thierry Breton called Intel’s announcement the “first visible result” of the effort, with more to follow. TSMC of Taiwan and Samsung of South Korea have also expressed interest. Currently, more than two-thirds of all modern semiconductors are manufactured in Asia. The EU Commission and the US, where work is also underway on a billion-dollar Chips Act, want to change this. German Chancellor Olaf Scholz expressed corresponding hopes: “The first production facility of its kind in the EU will help rebalance global silicon capacities and build a more resilient supply chain.”

Germany likely lured Intel with high subsidies. Even when asked, Minister President Haseloff did not want to give concrete figures. In the race with other locations, Magdeburg’s large area in the Eulenberg industrial park in the southwest of the city, its proximity to Berlin, and the availability of skilled workers were arguments in its favor. Chip factories also require a large amount of water and electricity capacity. These are available in Magdeburg with the Elbe River and the Wolmirstedt high-voltage line node for cheap wind power from northern Germany.

First chips from the Börde not until 2027

Intel announced that it would initially create 3,000 high-tech jobs in Magdeburg. The US company already employs around 10,000 people in several European countries. Despite the pace that all sides want to set, it is likely to be some time before the first Intel chips are built in Germany. Construction is scheduled to start in the first half of 2023, with production to begin four years later. In time for the expected start of construction, the European Chips Act could thus also be ready, which Parliament and the Council have yet to discuss. rtr/fst

ENVI: revision of ETS Market Stability Reserve adopted

As the first dossier of the Fit for 55 package, the revision of the Market Stability Reserve (MSR) has cleared the hurdle of the parliamentary committee. On Tuesday, MEPs in the Committee on the Environment, Public Health and Food Safety (ENVI) Committee voted by a majority in favor of the report by Maltese Social Democrat Cyrus Engerer, after first voting on some amendments.

The MSR revision is part of the reform of the EU Emissions Trading Scheme (ETS). It is designed to protect the ETS from market shocks while removing surplus allowances from the market without directly canceling them. The Commission’s proposal for the MSR revision calls for 24 percent of allowances available on the market to be transferred to the reserve by 2023. After that, the share would drop to 12 percent.

The ENVI report includes extending the period in which the 24 percent applies to 2030. It also calls for the minimum number of allowances in the MSR to be increased from 100 million to 200 million. This is intended to prevent an excessive surplus of available allowances and send a price signal to enable “cost-effective greenhouse gas emission reductions” for sectors affected by the ETS, the report says. MEPs also call on the Commission to monitor the impact of the reserve and keep it operational in case of future unforeseen external market shocks.

A stable ETS is crucial in these unprecedented times, said rapporteur Engerer. The MSR offers emissions trading the opportunity to adapt to the dynamic needs of the market. It is also designed to prevent economic crises, such as during the COVID-19 pandemic, and to better protect businesses and consumers from excessive prices.

65 deputies ultimately voted in favor of the report, with 20 votes against and one abstention. The report is to be submitted to the plenum for a vote in the first week of the April session. luk

Taxonomy: EU advisers propose additional category for sustainable investments

European Union advisers recommend adding another category to the controversial taxonomy used to classify sustainable investments in the EU. An amber classification could identify forms of energy that are still needed as a transitional solution on the road to climate neutrality, EU adviser Nathan Fabian told the environment and economics committees in the European Parliament on Tuesday.

Despite sharp criticism from many countries, the EU Commission intends to stick to its plans to award an eco-label to nuclear power and natural gas, at least under certain criteria. The so-called taxonomy is intended to channel financial flows specifically into sustainable technologies. Some EU countries see gas as a bridge to climate neutrality because it produces fewer CO2 emissions than oil and coal. Critics of nuclear power complain about radioactive waste, which is why this form of energy cannot be sustainable.

Fabian stressed, however, that the commission’s plans are not compatible with the 1.5-degree target because they allow too high emissions from the use of gas. This would send a signal to the market that a technology that emits more CO2 than the average energy mix is sustainable. rtr/luk

Gas crisis: Liberals miss interim targets

Liberals in the European Parliament have called on the Commission to quickly present a more precise timetable for greater independence from Russian gas imports. “What are the necessary goals and milestones to be achieved in the coming weeks and months?” asked Czech MEP Martina Dlabajová (Renew) in the Industry Committee on Tuesday. Energy Commissioner Kadri Simson presented the REPowerEU strategy to MEPs there, which outlines a framework for security of supply next winter and long-term measures until 2030. Commission President Ursula von der Leyen has announced the next steps for the end of March.

Liberals question the Commission’s estimate that the EU could obtain 50 billion cubic meters (bcm) of liquefied natural gas (LNG) from alternative sources within the next year. “On what basis did you calculate the 50 bcm,” Dlabajová wanted to know. She sees obstacles in the global availability of LNG tankers and liquefaction capacity for natural gas.

Political groups demand price cap

Faced with increased gas, electricity, and fuel prices, MEPs from several political groups called for price caps. Energy prices should be frozen at September levels, said Belgian Marc Botenga (Left), suggesting that harmonized minimum rates for energy taxes be dispensed with across Europe and that tax rates be left entirely to the member states. The right-wing Identity and Democracy group also called for considering price limits.

“Monitor the electricity market and put forward strict rules to prevent this profiteering,” said Romanian Dan Nica of the Social Democrats, addressing the Commission. Nica referred to competition law in the telecommunications sector without formulating a precise proposal. The electricity market regulator ACER plans to present a report soon with ways to further develop the market design for electricity.

So far, however, no one has put forward proposals for a better design, Simson countered. The rules for the electricity market must stimulate investment in renewable energies, curb price fluctuations and protect consumers. ber

China resells US gas to Europe

China has supplied liquefied natural gas (LNG) from the United States to Europe. Unipec, the trading arm of China’s state-owned oil and gas company Sinopec, resold three shipments to ports in Europe and turned a profit, Bloomberg reports.

The resale of gas to Europe reveals the impact of high energy prices on global trade flows. This is because China is now the largest importer of LNG gas. The People’s Republic’s gas demand is also rising. LNG is expected to play a greater role in the medium term to reduce coal consumption and achieve the People’s Republic’s climate targets.

Last week, natural gas prices in Europe rose to a new high. The cause is uncertain supplies from Russia. The price increase prompted Unipec traders to turn away from the lower-priced Chinese market, according to Bloomberg. This is particularly surprising given that Beijing had recently ordered importers to secure imports of energy commodities and food (China.Table reported). nib

Florian Drücke: the voice of the music industry

Of course, it was a great honor for Florian Drücke (47) to receive a knighthood from the French Minister of Culture. But the Chairman of the German Music Industry Association (BVMI) and Co-President of the Franco-German Cultural Council had one request. That the ceremony please be held in his home town of Heidelberg, instead of at the French Embassy on Pariser Platz in Berlin, as is usually the case. “I think that many things are much better and more stringent when told on a small scale. Anything else would have seemed a bit disconnected to me in that respect.”

Staying grounded and helping to shape change: Two basic motifs of Drücke’s career. He started as in-house counsel at BVMI in 2006, at a time when the music industry was in the throes of a swan song. CD revenues were plummeting, net piracy was in full bloom, the MP3 format’s copying capabilities were unleashing their full power, and many peer-to-peer sharing users hated the music industry. But 2006 was also the year Spotify was founded. It was clear to Drücke early on that a major process was getting underway here, at the end of which copyright and monetization of content would be significantly different.

Meanwhile, the music industry has reinvented itself. Audio streaming was its mainstay in 2021, accounting for 68 percent of sales. “Helping to shape the framework, leading discussions about how to get there – that’s what’s kept me involved all these years.” Particularly exciting for Drücke in this regard: The music industry always takes on a pioneering role. This is one of the reasons why fundamental issues are often discussed here, such as algorithms, filters, and liability issues.

Drücke has changed the BVMI image

As chairman of the BVMI, Drücke accompanies these processes as a representative of the music companies: “There is always translation work behind it. How can I explain what is totally difficult from a legal point of view? How can I explain how the industry works, i.e., the big picture?”. Drücke is experienced in moderating interests to be able to work out common lines. Creativity plays a major role here; Drücke draws on his deep understanding of the complicated mechanisms of the music industry in discussions. In the meantime, the association has refrained from overly aggressive campaigns against end-users, appealing more often to solidarity with artists.

Drücke is very aware that spamigation has damaged the industry’s reputation – even if it could be considered economically successful. Instead, the association is focusing more on the question of who earns money on the Internet: platform operators like Spotify, Apple, or Amazon – or the music industry and thus perhaps also the creatives? Time and again, the question arises as to who should receive what share of the revenue pie and whether algorithms ensure unfair distribution in the process. And how illegal content is regulated on platforms and by hosting providers is an ongoing issue for Drücke, even beyond the Digital Services Act.

What will he be focusing on in the future? First of all, working to ensure that the creative industries in Germany are understood as a separate branch of the economy. During the years of the pandemic crisis, he saw things moving in the right direction, especially with the k3d initiative, in which everyone from architects to magazine publishers pulled together. But a government contact person for the creative industries has still not emerged, despite all the assurances that there is an urgent need for action here.

The debate about European copyright, on the other hand, is now on the home stretch, after a run-up of twenty years. However, by opting for a special path, the previous German government made a choice that will make cooperation more difficult for partners in the European digital single market. According to Drücke, it is all the more important to communicate the next steps of innovation now to be sustainably positioned in the future. In other words, what has been his day-to-day business for just over fifteen years. Julius Schwarzwälder