Brussels update: January

A fresh start: what to expect in 2022?

2022 is set to be a critical year for Europe. With a new German government taking over the reins from former German Chancellor Angela Merkel, and French presidential elections taking place in April, we could see a renewed direction for Europe. All this is set against the backdrop of the ongoing COVID-19 recovery, as European countries struggle to contain the spread of Omicron, vaccinate their citizens and ultimately transition to a phase of living with the virus.

To begin 2022, the French government has taken over the Presidency of the Council of the EU, with ambition to set the direction of travel in Brussels. Focussed on “recovery, power, belonging,” the French presidency will seek to advance legislation concerning digital, tax and climate policy, all while enhancing EU sovereignty.

Ahead of the French presidential election, many see French President Emmanuel Macron using his Council Presidency to bolster his chances of re-election. Therefore, the next two months will be crucial.

What can we expect?

France

1. France is keen to develop a regulatory framework for the digital economy, and will prioritize finalising negotiations on the Digital Markets Act to reduce online market abuses, and the Digital Services Act to establish EU wide online content regulation
2. France has also been a longstanding supporter of reforming global taxation rules, and will prioritise the minimum global corporate tax, as well as plans to tax digital giants
3. France has pledged to raise EU climate ambitions by making progress on the proposals under the ‘Fit for 55’ package. A key priority will be the proposed Carbon Border Adjustment Mechanism, to introduce a carbon levy on certain imported products to the EU
4. Finally, the French government is committed to promoting European sovereignty and strategic autonomy. We will see a continuation of a defensive trade agenda, with files such as the instruments on foreign subsidies and on anti-coercion at the forefront.

Germany

In parallel, Germany’s new three-party coalition government will play a key role in steering EU legislation in 2022. German priorities are broadly in line with the French agenda for Europe:

1. The push for an increasingly sovereign EU
2. Priorities for a reformed EU
3. Ambitions for a digital and green transformation.

Nevertheless, we may see some divergences arising. With the Green party now a member of the ruling German coalition, it will be important to watch what this means in Brussels. One contentious area bubbling up is energy policy; where Macron is a long-standing supporter of nuclear power, the German Greens are strongly opposed. The CBI  will be watching closely to see how the Franco-German partnership plays out in Brussels this year.

Want to stay up to date with EU policy, and get involved with our EU networks?

2022 will be a key year for the CBI in Europe, with lots of activities coming up. Get in touch with our team in Brussels to get involved.

The EU’s pursuit of strategic autonomy: what does it mean?

When the European Commission published its trade policy review almost a year ago, it set out the concept of ‘open strategic autonomy’, highlighting a move towards the EU taking a more assertive stance in defending its interests, through new tools. One year later, we have seen the unfolding of a more defensive trade agenda as the EU seeks to achieve strategic autonomy, limiting the dependencies that were laid bare during the pandemic. In order to achieve this, the EU is using a whole host of tools, including its:

• International procurement instrument
• A carbon border tax
• An instrument on foreign subsidies
• Most recently: an instrument on anti-coercion.

The proposed instrument on anti-coercion, presented at the end of last year, aims to counteract coercive action by third countries by allowing the EU to impose countersanctions on individuals, companies, and entire countries. This might include: suspending preferential tariffs, restricting access to public procurement or the possibility to invest, and sanctioning intellectual property rights.  Since the EU doesn’t have a dedicated legislative framework that deals specifically with coercion, the aim is to bolster the EU’s ability to mobilise its economic weight through the Commission.

The CBI  will be working with BusinessEurope to respond to the latest proposal on anti-coercion, ensuring effective and appropriate rules. However, it is more important than ever that the EU remains committed to a multilateral and rules-based international order, as well as remaining open to free trade and investment.

The EU and the UK have a key role to play in working together to defend free and open trade, prioritising a rules-based multilateral trading system. The CBI is committed to working with both UK and EU stakeholders to push forward a cooperative approach on key trade policy issues.

Want to get involved?

Our EU trade network meets regularly to discuss EU and global trade policy and shape a unified business voice. Get in touch with Emily Ritchey.

EU Taxonomy: final steps towards finalisation

The end of 2021 brought with it an extra surprise for EU Member State capitals: a delegated act on sustainable investment criteria, a key step in completing the EU taxonomy. The EU taxonomy is a rule book for economic activities that are considered  “green” and is intended to channel investments towards achieving carbon neutrality by 2050. It lists economic activities and the environmental criteria investments must meet to be labelled as green investments, and thereby make them more attractive to private capital. The draft act published late on 31 December has proved controversial as it would label nuclear and gas power generation as green on the grounds they are “transitional activities”. Whilst not fully sustainable, they have emission rates below industry average.

The proposal has sparked divergence among Member States, with the new German government particularly critical of labelling nuclear power as green. Nevertheless, countries such as France have been pushing for its inclusion. The Commission will now collect comments from EU countries and with the hope to adopt a final text by the end of January. The text will then be discussed with EU governments and the European Parliament with a view to enforce as of 2023.

The CBI, along with BusinessEurope, supports giving greater clarity to green financial products, and stresses that progress will need to be made in incremental steps. The EU needs to ensure capital does not solely accumulate in green assets such that transitional economic activities lose the capital necessary to help economies transition to net zero.

As the UK is starting work on its green taxonomy, we are following EU developments closely, as well as actively engaging on creating the UK green taxonomy. As set out in our report, financing the transition to a sustainable future, it is critical to encourage global regulatory alignment on sustainable finance, including taxonomies. We are calling on both the EU and UK to encourage the development of shared international principles for taxonomies to allow for greater cross-border comparability and interoperability.

Want to get involved?

If you would like to discuss our work on sustainable finance, please contact Julia Jasinska.