- Minimum tax: EU implements OECD model
- EU Commission removes many industries from aid list
- European Property Register: Commission launches feasibility study
- Buschmann wants Telegram to cooperate through DSA
- Association files suit against compulsory storage of fingerprints
- EU vaccination certificate valid for nine months without booster
- Russia stops gas supply to Germany
- Microsoft acquires AI specialist Nuance
- Air safety: dispute over 5G in the USA
- Opinion: Why green technology can make the EU a global leader in climate protection
This time it was not Poland: The ECJ had to deal with the question of whether national constitutional law could trump European law on the basis of several Romanian legal disputes – again involving judicial issues. No, that is not possible, the Luxembourg judges ruled. While the organization of the judiciary is a competence of the member states, whether European law must be applied is not included in that. That hits home – and is a clear message to all European constitutional courts, including the German Federal Constitutional Court.
“COVID does not take a Christmas break,” German Chancellor Olaf Scholz said, following the switching conference of the federal and state governments yesterday evening. A contradiction to the decisions made, because there will be no immediate contact restrictions, as the RKI had demanded before the meeting. Only from December 28th at the latest will a maximum of ten people be able to meet privately – this also applies to the vaccinated and those who have recovered.
Today, the EU Commission is presenting its plans for the implementation of the global minimum tax. These will be largely based on the OECD guidelines, as Falk Steiner reports. In any case, European disputes could arise over the resulting revenues.
Yesterday, the Commission presented the new Climate, Energy and Environmental Aid Guidelines (CEEAG). They define the framework within which the member states are allowed to push decarbonization with the help of subsidies. Till Hoppe reports on the exact changes and the extent to which the Commission has responded to previous criticism from industry associations and the German government.
Jasmin Kohl
Feature
Minimum tax: EU implements OECD model
How can large international companies be effectively persuaded to pay appropriate taxes? This question has been on the minds of many for years. And not least in the European Union, where some states use tax structuring schemes to profit disproportionately from the profits of companies in other countries.
Examples of this intra-European competition were the controversial granting of company-specific tax advantages in Luxembourg or low tax rates combined with advantageous company constructions such as the infamous “Double Irish with a Dutch Sandwich”. With such tax constructions, international companies were able to relieve their European profits of parts of their tax burden. For a long time, German companies, in particular, made extensive use of the possibility of shifting profits from high-tax countries to low-tax countries via royalty payments within their corporate network.
The new regulation is intended to put a stop to such practices – and thus also put an end to the European debates on the so-called digital tax. France, Spain, Italy, and Austria had introduced different variants of a tax on digital sales in recent years. In October, however, following negotiations with the US, they agreed to phase out their special digital taxes as part of the international tax agreement and to offset the resulting tax burden against the minimum taxation that would then apply.
Second pillar creates more clarity
On Monday, the Organisation for Economic Co-operation and Development (OECD) published details of the second pillar of its model for global minimum taxation. The first pillar of the OECD framework shifts some tax collection rights to the state of the market location and aims to ensure an adequate distribution of tax revenue between the states concerned.
The second pillar deals primarily with the question of how tax bases can be systematically standardized. Only if it can be determined in a comparable manner where which sales are generated and where which parts of a company have paid taxes, can it be reliably determined which effective tax burden a company is subject to and whether it falls below the minimum taxation threshold in a state.
This second pillar is to be implemented in national regulations by all countries that politically support minimum taxation – in the case of Europe, also in the regulations of the European Union. In line with the OECD proposal for the second pillar, companies whose parent company generates a pre-tax turnover of more than 750 million are to be subject to a minimum tax rate of 15 percent – with some exceptions, such as for pension funds, investment funds, and real estate companies.
If the total tax rate of the subsidiaries operating in a country is lower than the minimum tax rate in relation to the input tax turnover, a supplementary tax is to be payable. This so-called top-up tax is to be paid in the market location country. How high the tax revenue will actually be with this comparatively low minimum tax rate – US Treasury Secretary Janet Yellen, for example, had advocated at least 21 percent – is currently still open.
However, one direct effect affects companies in member states such as Ireland: The island republic has announced that it will raise the corporate tax on trade in goods and services from 12.5 percent to 15 percent. This is a different kind of tax avoidance: The top-up tax would probably not be due in other states.
Dispute with member states over revenue
However, on the basis of the model rules for the second pillar, the detailed framework is now available, which must now be carried out by the nation states and the European Union and for which the supreme European treaty guardian authority will present its draft today.
But a new point of contention is already emerging: Many EU member states are already firmly counting on revenue from minimum taxation from 2023. But the EU Commission is currently giving high priority to finding its own sources of revenue – not least in order to be able to service the €390 billion debt of the EU COVID Recovery Fund from 2028. The other €360 billion of the fund have been disbursed as loans to the member states and must be successively repaid by them, for which they, in turn, depend on further revenue.
So far, however, the EU as such has not had any significant revenues of its own. A draft of the “next generation of the EU budget” escaped from the Berlaymont contained a “whole basket” of possibilities. In addition to revenues from the also still open CO2 border adjustment mechanism CBAM and the CO2 certificate trading ETS, the draft provides right at the top for the international framework to prevent profit shifting and to introduce a minimum tax. The justification, as clear as it is simple: “These initiatives require EU action, and thus constitute a proper basis for the EU’s own resources”.
EU Commission removes many industries from aid list
On the one hand, the EU Commission is expanding the scope for member states to use state aid to drive forward the transformation to a climate-neutral economy. At the same time, however, the competition authorities are limiting their options for providing relief to energy-intensive industries. This is likely to affect German industry in particular, which is complaining about high electricity prices by European standards due to the burden of taxes, levies, and surcharges.
European Commissioner for Competition Margrethe Vestager yesterday presented the new Climate, Energy and Environmental Aid Guidelines (CEEAG). These set out the framework within which governments can use subsidies to boost decarbonization. They will come into force in mid-January and replace the previous guidelines from 2014.
From the point of view of German industry, the provisions governing the conditions under which energy-intensive sectors may be exempted from levies to finance renewable energies are particularly sensitive. The previous list comprised 221 sectors that were considered to be at risk of migration and could therefore be exempted from the EEG surcharge. In the course of the revision, the Commission has narrowed down this list considerably: It now comprises 116 sectors, of which 91 are considered to be particularly at risk.
A first draft from the summer had provided for even more severe cuts – and put both industry associations and the German government in a state of alarm. Recently, it had already become apparent that the Commission would react to the criticism (Europe.Table reported). Vestager said at the presentation of the new guidelines that there had been “a lot of back and forth” on this issue. She said that the Commission had reacted to the numerous feedbacks, but that energy-intensive companies also needed incentives for decarbonization.
According to the new guidelines, a sector can be exempted from the levy as being particularly vulnerable to migration if it has a trade intensity and an electricity intensity of at least five percent each. The multiplication of the two values must result in at least two percent. Sectors are considered “at risk” if this factor is still above 0.6 percent.
The “ship is sailing” for fossil fuels
Sectors that are particularly at risk, however, must bear at least 15 percent of the levy themselves; for the others, the threshold is somewhat higher at 25 percent. If this would overburden companies, governments can alternatively limit cost sharing to 0.5 percent of gross value added. This was a demand made by the DIHK, for example, in summer.
The German Chemical Industry Association (VCI) therefore reacted with relief. “The Commission has moved in the right direction in the final state aid guidelines compared to the draft versions,” said Jörg Rothermel, Head of the Energy and Climate Protection Department. He particularly welcomed the fact that industrial gases could receive aid. Otherwise, the entry into the hydrogen economy desired by politicians would have been “massively hindered or even made impossible”, Rothermel said.
Subsidies for fossil fuels such as coal or diesel should hardly be possible anymore. For them, “the ship is sailing”, said Vestager. Natural gas is a temporary special case because it serves “as a bridge”.
However, in order for governments to continue to promote gas-fired power plants, they must meet certain criteria.
For example, they must not replace investments in clean energy sources. In addition, plants must be able to be converted to hydrogen or have the technology to capture the resulting carbon dioxide (CCS/CCU). In poorer member states, gas-fired power plants can also be subsidized if more climate-damaging coal-fired power plants are shut down in return. However, the guidelines are silent on subsidies for nuclear power plants – according to Vestager, these will be examined on a case-by-case basis on the basis of the EU treaties.
In addition, member states are allowed to promote ships or trucks powered by liquefied natural gas (LNG), for example, along with the charging infrastructure, because no clean alternatives are yet available in these areas. Clean mobility is one of the new areas covered by the guidelines. In addition, the Commission also wants to approve programs to promote the circular economy, energy efficiency, and biodiversity.
In addition, new instruments are taken into account, such as CO2-differential contracts. However, Rothermel criticizes that the Commission only explains in a footnote how it envisages these carbon contracts for difference. “We would have liked more guidance on this.”
More tenders
In order to limit the costs for taxpayers, the Commission is relying even more than before on competitive tendering for the award of contracts. Vestager rejects the criticism that this would mean additional work for authorities and companies alike: “It is not about additional bureaucracy, but about value for money. The Commission argues that the auction practice has greatly reduced the costs of renewable energies, for example.
As a further precaution against excessive support, the Authority relies on public consultations: In the future, member states are to consult other market participants first before submitting a support measure to the Commission for approval. Experts criticize that this also means additional effort. The Commission, on the other hand, maintains that the obligation only applies to projects with an investment volume of more than €100 million per year and offers additional legal certainty. The measure is to come into force in July 2023.
News
Opinion
Why green technology can make the EU a global leader in climate protection
Though the dramatic post COP26 tensions over the wording of the final agreement on coal phase down are fading over time, the November 2021 meetings in Glasgow may still be remembered in of our journey away from carbon dependency for other reasons. Unless rapid action is taken over the coming months, COP26 may be marked as the point at which the Global South gave up trying to trust the promises of developed countries on climate financing.
In Glasgow, it became clear that the Paris commitment to $100 billion a year in aid to build climate resilience from developed countries by 2020, was never going to materialize, and the need for adaptation financing is estimated by UN the Environmental Programme to be five times current levels.
EU as a mediator between industrialized and developing countries
If the trust gap between developing and developed countries that emerges from this reality is not addressed, the prospects for COP27 in Sharm El Sheikh and beyond look bleak. The fragile consensus around the COP process could disintegrate altogether if the economies that industrialized earlier and faster do not accept that it is unjust for them not to support the countries that are suffering the consequences of their unrestricted use of fossil fuels over the past decades.
But with deep political divisions over climate action in the US and the size of Joe Biden’s Build Back Better bill, as well as its decarbonization measures facing a rough ride through the Senate, it seems unlikely that leadership will come from Washington to unblock this situation. Unfortunately, with a strong sense in Brussels and other major EU capitals, that Europeans have already contributed far more than their partners on the other side of the Atlantic in climate financing.
Still, the EU may be able to lead us away from a hardening of tensions between developed and developing countries over this issue. But it requires both a broader understanding of what climate support means and a more interest-based narrative.
Intellectual property rights in green technologies: no monopolization
The rapid development and deployment of a wide range of zero-carbon technologies and supporting infrastructure are crucial to climate change mitigation. This is particularly true in the Global South. Rich countries – and particularly those who are ahead in building up tech capacity – will only impede global development if they monopolize the intellectual property rights of green technology while applying carbon border adjustments. In contrast, swift and effective deployment of such technologies globally would strengthen efforts to mitigate climate change overall, as well as bringing economic dividends to the countries that develop them.
A climate leadership strategy that the EU could choose to follow at this delicate moment, therefore, is to build green tech capacity in partnership with the Global South. This should include incurring the development costs of some technologies. And it could help to accelerate its green transition in a manner that meets its own infrastructure needs, at the same time as building green tech industries in the Global South. Although there is fierce global competition over green technologies, European companies still play leading roles in areas such as the wind power industry, as well as hydrogen and electrical grid technologies – including electric vehicle charging technology.
At the same time, we should not be blind to our interdependence. The EU is reliant for both raw materials and innovation and capacities on its relationships with third countries. So, research, development, and industrial policies that encourage the development of low-carbon technologies in the Global South are win-win for both the EU in its own decarbonization, as well as for the economic development- and their own transition away from carbon – in partner countries.
New fund for co-investment and dissemination of green technologies
The recently announced EU Global Gateway initiative holds promise as a credible green alternative to China’s Belt and Road initiative, but it needs to be properly financed, including initiatives such as increasing the European Investment Bank’s capital. The EU should increase its investment in co-innovation programs and ensure that green technologies developed with public support are available to those that do not own their intellectual property.
To this end, the EU could create a Co-innovation and Green Technology Diffusion Fund, financed partly through the Global Europe program and partly by income from the EU’s Emissions Trading System and the Carbon Border Adjustment Mechanism (CBAM). But an additional focus in efforts should be to leverage private finance in this field. The EU could also work to break the deadlock in multilateral negotiations on green technology transfers by taking a more constructive approach to intellectual property rights at the WTO.
Building green tech partnerships cannot, of course, replace the climate finance question, but it can go some way to re-finding the goodwill that was lost in Glasgow and putting developed economies’ credibility in climate negotiations, back on course with the Global South. Since it will also support Europe’s own decarbonization and allow European companies to remain competitive as their dependencies shift, it seems a strategy worth pursuing with vigor.
Europe.Table Editorial Office
EUROPE.TABLE EDITORS
- Minimum tax: EU implements OECD model
- EU Commission removes many industries from aid list
- European Property Register: Commission launches feasibility study
- Buschmann wants Telegram to cooperate through DSA
- Association files suit against compulsory storage of fingerprints
- EU vaccination certificate valid for nine months without booster
- Russia stops gas supply to Germany
- Microsoft acquires AI specialist Nuance
- Air safety: dispute over 5G in the USA
- Opinion: Why green technology can make the EU a global leader in climate protection
This time it was not Poland: The ECJ had to deal with the question of whether national constitutional law could trump European law on the basis of several Romanian legal disputes – again involving judicial issues. No, that is not possible, the Luxembourg judges ruled. While the organization of the judiciary is a competence of the member states, whether European law must be applied is not included in that. That hits home – and is a clear message to all European constitutional courts, including the German Federal Constitutional Court.
“COVID does not take a Christmas break,” German Chancellor Olaf Scholz said, following the switching conference of the federal and state governments yesterday evening. A contradiction to the decisions made, because there will be no immediate contact restrictions, as the RKI had demanded before the meeting. Only from December 28th at the latest will a maximum of ten people be able to meet privately – this also applies to the vaccinated and those who have recovered.
Today, the EU Commission is presenting its plans for the implementation of the global minimum tax. These will be largely based on the OECD guidelines, as Falk Steiner reports. In any case, European disputes could arise over the resulting revenues.
Yesterday, the Commission presented the new Climate, Energy and Environmental Aid Guidelines (CEEAG). They define the framework within which the member states are allowed to push decarbonization with the help of subsidies. Till Hoppe reports on the exact changes and the extent to which the Commission has responded to previous criticism from industry associations and the German government.
Jasmin Kohl
Feature
Minimum tax: EU implements OECD model
How can large international companies be effectively persuaded to pay appropriate taxes? This question has been on the minds of many for years. And not least in the European Union, where some states use tax structuring schemes to profit disproportionately from the profits of companies in other countries.
Examples of this intra-European competition were the controversial granting of company-specific tax advantages in Luxembourg or low tax rates combined with advantageous company constructions such as the infamous “Double Irish with a Dutch Sandwich”. With such tax constructions, international companies were able to relieve their European profits of parts of their tax burden. For a long time, German companies, in particular, made extensive use of the possibility of shifting profits from high-tax countries to low-tax countries via royalty payments within their corporate network.
The new regulation is intended to put a stop to such practices – and thus also put an end to the European debates on the so-called digital tax. France, Spain, Italy, and Austria had introduced different variants of a tax on digital sales in recent years. In October, however, following negotiations with the US, they agreed to phase out their special digital taxes as part of the international tax agreement and to offset the resulting tax burden against the minimum taxation that would then apply.
Second pillar creates more clarity
On Monday, the Organisation for Economic Co-operation and Development (OECD) published details of the second pillar of its model for global minimum taxation. The first pillar of the OECD framework shifts some tax collection rights to the state of the market location and aims to ensure an adequate distribution of tax revenue between the states concerned.
The second pillar deals primarily with the question of how tax bases can be systematically standardized. Only if it can be determined in a comparable manner where which sales are generated and where which parts of a company have paid taxes, can it be reliably determined which effective tax burden a company is subject to and whether it falls below the minimum taxation threshold in a state.
This second pillar is to be implemented in national regulations by all countries that politically support minimum taxation – in the case of Europe, also in the regulations of the European Union. In line with the OECD proposal for the second pillar, companies whose parent company generates a pre-tax turnover of more than 750 million are to be subject to a minimum tax rate of 15 percent – with some exceptions, such as for pension funds, investment funds, and real estate companies.
If the total tax rate of the subsidiaries operating in a country is lower than the minimum tax rate in relation to the input tax turnover, a supplementary tax is to be payable. This so-called top-up tax is to be paid in the market location country. How high the tax revenue will actually be with this comparatively low minimum tax rate – US Treasury Secretary Janet Yellen, for example, had advocated at least 21 percent – is currently still open.
However, one direct effect affects companies in member states such as Ireland: The island republic has announced that it will raise the corporate tax on trade in goods and services from 12.5 percent to 15 percent. This is a different kind of tax avoidance: The top-up tax would probably not be due in other states.
Dispute with member states over revenue
However, on the basis of the model rules for the second pillar, the detailed framework is now available, which must now be carried out by the nation states and the European Union and for which the supreme European treaty guardian authority will present its draft today.
But a new point of contention is already emerging: Many EU member states are already firmly counting on revenue from minimum taxation from 2023. But the EU Commission is currently giving high priority to finding its own sources of revenue – not least in order to be able to service the €390 billion debt of the EU COVID Recovery Fund from 2028. The other €360 billion of the fund have been disbursed as loans to the member states and must be successively repaid by them, for which they, in turn, depend on further revenue.
So far, however, the EU as such has not had any significant revenues of its own. A draft of the “next generation of the EU budget” escaped from the Berlaymont contained a “whole basket” of possibilities. In addition to revenues from the also still open CO2 border adjustment mechanism CBAM and the CO2 certificate trading ETS, the draft provides right at the top for the international framework to prevent profit shifting and to introduce a minimum tax. The justification, as clear as it is simple: “These initiatives require EU action, and thus constitute a proper basis for the EU’s own resources”.
EU Commission removes many industries from aid list
On the one hand, the EU Commission is expanding the scope for member states to use state aid to drive forward the transformation to a climate-neutral economy. At the same time, however, the competition authorities are limiting their options for providing relief to energy-intensive industries. This is likely to affect German industry in particular, which is complaining about high electricity prices by European standards due to the burden of taxes, levies, and surcharges.
European Commissioner for Competition Margrethe Vestager yesterday presented the new Climate, Energy and Environmental Aid Guidelines (CEEAG). These set out the framework within which governments can use subsidies to boost decarbonization. They will come into force in mid-January and replace the previous guidelines from 2014.
From the point of view of German industry, the provisions governing the conditions under which energy-intensive sectors may be exempted from levies to finance renewable energies are particularly sensitive. The previous list comprised 221 sectors that were considered to be at risk of migration and could therefore be exempted from the EEG surcharge. In the course of the revision, the Commission has narrowed down this list considerably: It now comprises 116 sectors, of which 91 are considered to be particularly at risk.
A first draft from the summer had provided for even more severe cuts – and put both industry associations and the German government in a state of alarm. Recently, it had already become apparent that the Commission would react to the criticism (Europe.Table reported). Vestager said at the presentation of the new guidelines that there had been “a lot of back and forth” on this issue. She said that the Commission had reacted to the numerous feedbacks, but that energy-intensive companies also needed incentives for decarbonization.
According to the new guidelines, a sector can be exempted from the levy as being particularly vulnerable to migration if it has a trade intensity and an electricity intensity of at least five percent each. The multiplication of the two values must result in at least two percent. Sectors are considered “at risk” if this factor is still above 0.6 percent.
The “ship is sailing” for fossil fuels
Sectors that are particularly at risk, however, must bear at least 15 percent of the levy themselves; for the others, the threshold is somewhat higher at 25 percent. If this would overburden companies, governments can alternatively limit cost sharing to 0.5 percent of gross value added. This was a demand made by the DIHK, for example, in summer.
The German Chemical Industry Association (VCI) therefore reacted with relief. “The Commission has moved in the right direction in the final state aid guidelines compared to the draft versions,” said Jörg Rothermel, Head of the Energy and Climate Protection Department. He particularly welcomed the fact that industrial gases could receive aid. Otherwise, the entry into the hydrogen economy desired by politicians would have been “massively hindered or even made impossible”, Rothermel said.
Subsidies for fossil fuels such as coal or diesel should hardly be possible anymore. For them, “the ship is sailing”, said Vestager. Natural gas is a temporary special case because it serves “as a bridge”.
However, in order for governments to continue to promote gas-fired power plants, they must meet certain criteria.
For example, they must not replace investments in clean energy sources. In addition, plants must be able to be converted to hydrogen or have the technology to capture the resulting carbon dioxide (CCS/CCU). In poorer member states, gas-fired power plants can also be subsidized if more climate-damaging coal-fired power plants are shut down in return. However, the guidelines are silent on subsidies for nuclear power plants – according to Vestager, these will be examined on a case-by-case basis on the basis of the EU treaties.
In addition, member states are allowed to promote ships or trucks powered by liquefied natural gas (LNG), for example, along with the charging infrastructure, because no clean alternatives are yet available in these areas. Clean mobility is one of the new areas covered by the guidelines. In addition, the Commission also wants to approve programs to promote the circular economy, energy efficiency, and biodiversity.
In addition, new instruments are taken into account, such as CO2-differential contracts. However, Rothermel criticizes that the Commission only explains in a footnote how it envisages these carbon contracts for difference. “We would have liked more guidance on this.”
More tenders
In order to limit the costs for taxpayers, the Commission is relying even more than before on competitive tendering for the award of contracts. Vestager rejects the criticism that this would mean additional work for authorities and companies alike: “It is not about additional bureaucracy, but about value for money. The Commission argues that the auction practice has greatly reduced the costs of renewable energies, for example.
As a further precaution against excessive support, the Authority relies on public consultations: In the future, member states are to consult other market participants first before submitting a support measure to the Commission for approval. Experts criticize that this also means additional effort. The Commission, on the other hand, maintains that the obligation only applies to projects with an investment volume of more than €100 million per year and offers additional legal certainty. The measure is to come into force in July 2023.
News
Opinion
Why green technology can make the EU a global leader in climate protection
Though the dramatic post COP26 tensions over the wording of the final agreement on coal phase down are fading over time, the November 2021 meetings in Glasgow may still be remembered in of our journey away from carbon dependency for other reasons. Unless rapid action is taken over the coming months, COP26 may be marked as the point at which the Global South gave up trying to trust the promises of developed countries on climate financing.
In Glasgow, it became clear that the Paris commitment to $100 billion a year in aid to build climate resilience from developed countries by 2020, was never going to materialize, and the need for adaptation financing is estimated by UN the Environmental Programme to be five times current levels.
EU as a mediator between industrialized and developing countries
If the trust gap between developing and developed countries that emerges from this reality is not addressed, the prospects for COP27 in Sharm El Sheikh and beyond look bleak. The fragile consensus around the COP process could disintegrate altogether if the economies that industrialized earlier and faster do not accept that it is unjust for them not to support the countries that are suffering the consequences of their unrestricted use of fossil fuels over the past decades.
But with deep political divisions over climate action in the US and the size of Joe Biden’s Build Back Better bill, as well as its decarbonization measures facing a rough ride through the Senate, it seems unlikely that leadership will come from Washington to unblock this situation. Unfortunately, with a strong sense in Brussels and other major EU capitals, that Europeans have already contributed far more than their partners on the other side of the Atlantic in climate financing.
Still, the EU may be able to lead us away from a hardening of tensions between developed and developing countries over this issue. But it requires both a broader understanding of what climate support means and a more interest-based narrative.
Intellectual property rights in green technologies: no monopolization
The rapid development and deployment of a wide range of zero-carbon technologies and supporting infrastructure are crucial to climate change mitigation. This is particularly true in the Global South. Rich countries – and particularly those who are ahead in building up tech capacity – will only impede global development if they monopolize the intellectual property rights of green technology while applying carbon border adjustments. In contrast, swift and effective deployment of such technologies globally would strengthen efforts to mitigate climate change overall, as well as bringing economic dividends to the countries that develop them.
A climate leadership strategy that the EU could choose to follow at this delicate moment, therefore, is to build green tech capacity in partnership with the Global South. This should include incurring the development costs of some technologies. And it could help to accelerate its green transition in a manner that meets its own infrastructure needs, at the same time as building green tech industries in the Global South. Although there is fierce global competition over green technologies, European companies still play leading roles in areas such as the wind power industry, as well as hydrogen and electrical grid technologies – including electric vehicle charging technology.
At the same time, we should not be blind to our interdependence. The EU is reliant for both raw materials and innovation and capacities on its relationships with third countries. So, research, development, and industrial policies that encourage the development of low-carbon technologies in the Global South are win-win for both the EU in its own decarbonization, as well as for the economic development- and their own transition away from carbon – in partner countries.
New fund for co-investment and dissemination of green technologies
The recently announced EU Global Gateway initiative holds promise as a credible green alternative to China’s Belt and Road initiative, but it needs to be properly financed, including initiatives such as increasing the European Investment Bank’s capital. The EU should increase its investment in co-innovation programs and ensure that green technologies developed with public support are available to those that do not own their intellectual property.
To this end, the EU could create a Co-innovation and Green Technology Diffusion Fund, financed partly through the Global Europe program and partly by income from the EU’s Emissions Trading System and the Carbon Border Adjustment Mechanism (CBAM). But an additional focus in efforts should be to leverage private finance in this field. The EU could also work to break the deadlock in multilateral negotiations on green technology transfers by taking a more constructive approach to intellectual property rights at the WTO.
Building green tech partnerships cannot, of course, replace the climate finance question, but it can go some way to re-finding the goodwill that was lost in Glasgow and putting developed economies’ credibility in climate negotiations, back on course with the Global South. Since it will also support Europe’s own decarbonization and allow European companies to remain competitive as their dependencies shift, it seems a strategy worth pursuing with vigor.
Europe.Table Editorial Office
EUROPE.TABLE EDITORS