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Updated: 6 hours 46 min ago

State of the Union address, European Parliament, 2023

Thu, 09/07/2023 - 19:00

Written by Rafał Mańko.

The practice of European Commission presidents to deliver, each year in September, an EU State of the Union address, during a plenary session of the European Parliament, dates back to 2010. The address takes stock of the achievements of the past year and presents priorities for the year ahead. It is an important tool when it comes to the Commission’s ex-ante accountability vis-à-vis Parliament and is also aimed at rendering the definition of priorities at EU level more transparent and at communicating them to the public. The event chimes with similar practices in national democracies. The United States, for instance, has a long-standing tradition of presidential State of the Union addresses. In contrast to the US constitution, the EU Treaties do not prescribe a State of the Union address; the EU version was established by the 2010 Framework Agreement on relations between Parliament and the Commission.

European Commission President Ursula von der Leyen’s fourth State of the Union address, scheduled for 13 September 2023, will be the last address in this legislative mandate, ahead of the 2024 European elections. The Commission President is expected to outline the main priorities and flagship initiatives for the year to come, building on the EU’s successes and achievements of the past years. The address is to focus on ‘A stronger and more resilient European Union’ and is expected to address such issues as EU support for Ukraine, sanctions against Russia, the energy crisis, the green and digital transitions, as well protecting EU values, with particular focus on equality, inclusiveness and social fairness.

This briefing further updates an earlier one from September 2016, originally written by Eva-Maria Poptcheva.

Read the complete briefing on ‘State of the Union address, European Parliament, 2023‘ in the Think Tank pages of the European Parliament.

Categories: European Union

Voting from abroad in European Parliament elections

Thu, 09/07/2023 - 18:00

Written by Carmen-Cristina Cîrlig and Micaela Del Monte.

National provisions regarding the right to vote of citizens living abroad are far from being uniform in Europe. However, developments in legislation seem to underline a favourable trend with regard to out-of-country voting in most European Union (EU) Member States.

Concerning voting from abroad, countries need to carefully assess and address several issues. These include: the identification of potential voters; how to inform them about their right to vote and stand as a candidate from abroad; the design and implementation of timely registration processes; the training of staff in diplomatic missions (for in-person voting in consular and diplomatic missions); the design and implementation of secure voting procedures, as well as the possible transportation of ballots from abroad.

Against this background, the legal and practical arrangements for voting in the European elections for citizens who live, or who are temporarily outside, their home state vary a great deal between EU countries: most countries allow voting at embassies or consulates abroad, several countries allow citizens living abroad to vote by post, a few countries allow voting by proxy, and one (Estonia) allows electronic voting. On the other hand, there are four Member States which do not allow their citizens to vote abroad in the European elections (Czechia, Ireland, Malta and Slovakia).

Ahead of the European elections in June 2024, this briefing provides an overview of the national provisions concerning voting from abroad in the 27 EU Member States.

This briefing belongs to a series of publications being issued ahead of the 2024 European elections.

Read the complete briefing on ‘Voting from abroad in European Parliament elections‘ in the Think Tank pages of the European Parliament.

Categories: European Union

The six policy priorities of the von der Leyen Commission: State of play in autumn 2023

Thu, 09/07/2023 - 17:00

Written by Etienne Bassot.

The September 2023 state of the Union address will be the last one of this Parliamentary term. The European institutions are entering the final phase of the current five-year political and institutional cycle. With the European elections scheduled for 6-9 June 2024, this European Parliament will hold its final plenary session in April. These coming months will therefore be crucial for the Commission to deliver on its commitments and for the Parliament, together with the Council of the European Union, to adopt legislation.

A fair assessment of the Commission’s delivery on its commitments has to start with the recognition that this mandate has been marked by two challenges – literally – unknown to this generation in Europe. The first such challenge was the coronavirus pandemic. COVID-19 emerged as the Commission was just beginning its mandate; the pandemic was declared within its first 100 days. The second was Russia’s war on Ukraine. The effects of this ‘tectonic shift in European history’, to use the words of the Versailles Declaration, are manifold and far from over.

One of the main findings of this twice yearly analysis is that, over recent years, despite the challenges, the European institutions have delivered steadily: the European Commission has reacted with proposals and initiatives to address events as they unfold while at the same time continuing to deliver on its wider programme and commitments. The European Parliament too has continued to debate, negotiate and adopt legislation and budget, as has the other co-legislator, the Council.

That the rate of progress has remained, for a further half year, largely unchanged is to the credit of the European institutions: the Commission in tabling the initiatives, and the European Parliament and Council for their work on the legislative proposals, through to adoption. At a time when building compromise and reaching majorities is a challenge, as seen in the Member States of the European Union (EU) as well as in other democracies across the globe, and when democracy itself is challenged in too many places, this is an achievement worth noting, especially as the months tick down to the next European elections.

It is noteworthy that, on some parts of the political agenda, the challenges themselves have provided additional reasons to support initiatives and accelerate reform. This has been the case for instance for the European Green Deal. This summer, Europeans have once again experienced first hand, and even more so than in previous years, what global warming means in practice, from fires in Greece, Cyprus and Portugal to the flooding in Austria, Croatia and Czechia. July was the hottest month ever recorded on our planet, according to the European Union’s climate observatory, Copernicus. The wildfires raging in Greece are the biggest ever recorded in the European Union, according to the European Commission. This succession of extreme climate events over the summer has continued to show the crucial importance of delivering on the agreed targets, at both European and international levels. In the European Union, it is the role of the co-legislators to represent and bring on board all parts of society in reaching these objectives.

On the world stage too, international events have propelled this Commission’s priority of ‘a stronger Europe in the world’ to a new dimension, as illustrated by the photograph on the cover, which pictures the President of the European Commission, Ursula von der Leyen, addressing the European Parliament plenary session on geopolitical issues – in this instance on the need for a coherent strategy for EU-China relations.

This analysis monitors all six of the Commission’s priorities. It combines a two-page presentation of each priority and a synthesis infographic (page 3) illustrating the degree of progress – both overall and under each of the six priorities.

Our analysis finds that, across the six priorities, more than one third of the initiatives announced have been finally adopted, and almost a further third are proceeding normally through the legislative process. The adoption process varies from one proposal to another. The past few months have seen adoption in record time of the proposal for a regulation setting up an act in support of ammunition production (ASAP). Tabled by the Commission on 3 May 2023, it was signed on 20 July and published on 25 July. Other procedures can take years, and some 5 % of the total presented by the Commission are proceeding slowly or blocked. Nine months ahead of the European elections, and with just seven to go until the last plenary session of this Parliament, it is fair to assume that, with three in ten initiatives announced still to be submitted, and only a third of the announcements brought to final adoption in the past four years, not all the initiatives announced by the Commission will be tabled in time to be discussed and agreed by the co-legislators, and to come into law, before the end of this term.

According to this EPRS analysis, of the over 600 initiatives announced (610), more than two thirds (69 %, 420) have now been submitted and, in the case of the legislative proposals, the co-legislators have started work. It is worth noting that almost one in five of the Commission’s initiatives are non-legislative, for instance strategies, action plans and other communications. Of the 420 initiatives that have been submitted, just over half (53 %) have already been adopted (221) – by the legislators in the case of the legislative proposals, or simply by the Commission in the case of the non-legislative initiatives – while the vast majority of the other half are either proceeding normally through the legislative process (141, or 71 %) or are close to adoption (26, or 13 %). Conversely, a certain number are proceeding very slowly or are currently blocked (32, or 16 %).

With a focus on each of the six policy priorities, the European Green Deal ranks highest in terms of the number of initiatives planned (154). The executive has tabled almost two thirds of them (or 62 %), half of the latter (51 %) being adopted by the co-legislators. The third priority, ‘An economy that works for people’, comes next (128), with more initiatives tabled (72 %) but less than half of the latter have been adopted (46 %). The digital priority totals 105 initiatives planned, 55 % of which have already been submitted (58), and 31 adopted (53 % of the total). For ‘A stronger Europe in the world’, an area with relatively few legislative initiatives by definition, and in contrast to the majority of the Commission’s priorities, more than eight out of ten (82 %) initiatives have already been tabled (see Section 4) and three in five adopted. A fair amount of work remains to be done for the other priorities: 40 % of the proposals have still to be submitted for ‘A Europe fit for the digital age’, 19 % for ‘Promoting our European way of life’ and 28 % for ‘A new push for democracy’ (see Sections 2, 5 and 6). This latter priority comes lowest in terms of number of initiatives announced (60).

The next edition of this publication, scheduled for after the April plenary session, will be the last one of this cycle and will provide an overall assessment of the Commission’s delivery before the 2024 European elections. For more information on how the von der Leyen Commission’s agenda is proceeding, a proposal-by-proposal assessment is available on the European Parliament’s ‘Legislative Train Schedule‘ website, developed by EPRS.

The von der Leyen Commission’s six priorities: Legislative and non-legislative delivery as of 31 August 2023

Read the complete in-depth analysis on ‘The six policy priorities of the von der Leyen Commission: State of play in autumn 2023‘ in the Think Tank pages of the European Parliament.

Categories: European Union

Nuclear energy in the European Union

Thu, 09/07/2023 - 14:00

Written by Monika Dulian.

According to Article 194(2) of the Treaty on the Functioning of the European Union, each Member State independently decides on its own energy mix and use of nuclear energy. However, there are common rules and standards on nuclear energy, the basis for which is the Treaty on the European Atomic Energy Community (Euratom Treaty) signed in 1957. All current EU Member States are party to it and it has remained largely unchanged throughout the years. Common EU rules also stem from the Nuclear Safety Directive and Directive for the Management of Radioactive Waste and Spent Fuel.

Currently, 12 out of 27 EU Member States (Belgium, Bulgaria, Czechia, Finland, France, Hungary, Netherlands, Romania, Slovakia, Slovenia, Spain and Sweden) host nuclear power plants on their territory. Austria, Croatia, Cyprus, Denmark, Estonia, Ireland, Greece, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland and Portugal do not produce nuclear power. Just recently, Germany decided to completely phase out nuclear energy production. In 2021, nuclear energy made up 13 % of Europe’s energy mix and accounted for 25 % of all electricity produced.

The debate on nuclear energy in the EU focuses on both opportunities and challenges. Small modular reactors (SMRs) are often seen as offering potential solutions to energy supply issues and are likely to become a commercially viable nuclear product by the early 2030s. SMRs could be used for district heating, desalination, heat processing for energy-intensive industries and hydrogen production. One of the main challenges is dependency on Russian nuclear technology, uranium and fuel supplies. Although many countries are trying to diversify their fuel supply, recent research estimates that, in some cases, the dependency is unlikely to decrease. Another important challenge is high-level nuclear waste and spent fuel management. The solution appears to be deep geological disposals that should open in the EU between 2024 and 2035.

Different groups of countries – branded as either the ‘nuclear alliance’ or the ‘friends of renewables’– regularly argue about the role of low carbon energy sources (produced from nuclear) in the green transition and, consequently, in various pieces of energy and climate legislation. Those discussions are likely to continue as new legislative proposals emerge.

Read the complete briefing on ‘Nuclear energy in the European Union‘ in the Think Tank pages of the European Parliament.

Categories: European Union

Standards of quality and safety for substances of human origin intended for human application [EU Legislation in Progress]

Wed, 09/06/2023 - 08:30

Written by Laurence Amand-Eeckhout (1st edition).

On 14 July 2022, the European Commission tabled a proposal to update and expand EU legislation on blood, tissues and cells. The aim is to establish high standards of quality and safety for substances of human origin (SoHOs) intended for human application, to improve the protection of donors, recipients, and offspring born from medically assisted reproduction, and to ensure that the legislation can respond to future challenges. To improve harmonisation, ensuring a uniform level of protection across the EU and simplifying cross-border exchange and access of SoHO therapies, the Commission is proposing to repeal the existing directives and replace them with a single regulation that will be equally applicable in all Member States.

In Parliament, the Committee on the Environment, Public Health and Food Safety (ENVI), is responsible for the file. It adopted its report on the proposal on 18 July 2023.

Versions Proposal for a regulation of the European Parliament and of the Council on standards of quality and safety for substances of human origin intended for human application and repealing Directives 2002/98/EC and 2004/23/ECCommittee responsible:Environment, Public Health and Food Safety (ENVI)COM(2022) 338
14.7.2022Rapporteur:Nathalie Colin-Oesterlé (EPP, France)2022/0216 (COD)Shadow rapporteurs:Nicolás González Casares (S&D, Spain)
Andreas Glueck (Renew, Germany)
Tilly Metz (Greens/EFA, Luxembourg)
Joanna Kopcińska (ECR, Poland)
Kateřina Konečná (The Left, Czechia)Ordinary legislative procedure
(COD) (Parliament and Council
on equal footing – formerly ‘co-decision’)Next steps expected: Vote on report in plenary

Categories: European Union

What is the EU doing to ensure freedom of the media?

Tue, 09/05/2023 - 18:00

Citizens often turn to the European Parliament to ask what the European Union is doing to ensure freedom of the media.

Media freedom and pluralism are among the core values of the European Union, and are included in the rights and principles enshrined in the Charter of Fundamental Rights of the European Union. However, at a time when media freedom is being challenged in many countries all over the world, the European Union has taken action to protect the freedom and safety of media and journalists.

Position of the European Parliament

The European Parliament stresses the importance of independent journalism and access to pluralistic information as key pillars of democracy. It has repeatedly called for increased protection of journalists against lawsuits, attacks and intimidation, as well as for supporting and safeguarding a plurality of opinions.

In a November 2020 resolution on strengthening media freedom, the European Parliament voiced concerns about the state of media freedom within the EU. It also denounced the abuses and attacks perpetrated against journalists and media workers, highlighting the high vulnerability of female journalists to harassment and intimidation.

Members of the European Parliament have also addressed issues of media freedom and the safety of journalists in the context of the coronavirus pandemic, such as threats to media freedom, censorship in public media and government control of the media.

In 2023, Parliament denounced the increasing repression of critical voices, and attacks against journalists around the world, in countries like Kyrgyzstan, Algeria and Tunisia. It also addressed the war in Ukraine, which has been deadly for journalists. In July 2023, Parliament adopted a resolution calling on the EU to better protect journalists around the world.

Parliament has been calling for legislation to protect journalists. In November 2021, it adopted a resolution on lawsuits aimed at intimidating or discrediting journalists who have expressed critical views. Parliament called on the Commission to establish better protection and support mechanisms for victims of such lawsuits and the need to protect the safety and freedom of journalists. Following this call, the European Commission proposed new legislation in April 2022.

Parliament has also considered threats from foreign intervention. In two resolutions adopted in March 2022 and July 2023, Parliament urged the EU to create a common strategy to confront foreign interference and disinformation campaigns and called for more support to independent media, fact checkers and researchers.

To support journalists, Parliament awards, each year since 2021, the Daphne Caruana Prize for outstanding journalism reflecting EU values. The prize is a tribute to Daphne Caruana Galizia, a Maltese investigative journalist who was killed in a bomb attack in 2017. In addition, Parliament launched in April 2022 a scholarship scheme and training programmes for young journalists.

EU measures to protect media freedom

In September 2021, the Commission adopted a recommendation on ensuring the protection, safety and empowerment of journalists and other media professionals in the EU.

Following Parliament’s call from November 2021, the Commission proposed new rules in April 2022 in order to tackle strategic lawsuits against public participation. These rules would provide courts and victims of such lawsuits with the tools to fight back against manifestly unfounded or abusive court proceedings. The file is under consideration in the Parliament and Council.

In September 2022, the Commission proposed the European Media Freedom Act. This legislative proposal includes safeguards against political interference in editorial decisions and against surveillance. It focuses on the independence and stable funding of public service media. The proposal would also set up a new independent European Board for Media Services made up of national media authorities. It is currently under consideration in the Parliament and Council.

To respond to increasingly worrying trends across the EU in the media context, the Commission uses the Rule of Law Report and other tools such as the Media Pluralism Monitor. It also funds a rapid response scheme that tracks, monitors and reacts to violations of media freedom in EU and candidate countries.

Further Information

Keep sending your questions to the Citizens’ Enquiries Unit (Ask EP)! We reply in the EU language that you use to write to us.

Categories: European Union

Future Shocks 2023: Anticipating and weathering the next storms

Tue, 09/05/2023 - 08:30

Written by Zsolt Pataki.

The European Parliament launched a process of monitoring possible future risks for the EU during the COVID-19 crisis, and has developed this further during Russia’s war on Ukraine. The annual ‘Future Shocks’ series provides up-to-date, objective, and authoritative information on global risks through a 360° survey based on risk literature from a broad range of sources. Future Shocks 2023: Anticipating and weathering the next storms discusses 15 risks related to geopolitics, climate change, health, economics and democracy that could occur in the coming decade, and 10 policy responses to address both existing governance capacity and possible ways to enhance risk-response capabilities within the EU.

Need for a continuous risk-monitoring capability

As risks may at any time become reality, there is a need to continuously monitor risks with a potentially strong impact on the EU, and analyse the EU’s existing capabilities, resilience and possible responses in the face of multiple challenges. Therefore, ‘Future Shocks’ includes areas where the EU has primary competence but is not limited to these. It also identifies the benefits of concerted action by the EU, as well as the ability of its institutions and Member States to find new and effective solutions to deal with major shocks.

Importantly, many major risks transcend a given region or sector. According to a wide range of risk reports, among the main risks or challenging (mega)trends that Europe and the world face are climate change, loss of biodiversity, ageing populations, societal inequalities, security threats and migration pressures, and the need for sustainable food production. On top of this, Russia’s war on Ukraine was a wake-up call to those who considered that cooperation, inclusiveness and trade alone would be sufficient deterrents. Russia’s hybrid actions (cyber-attacks, disinformation, weaponisation of energy) targeting the EU and neighbouring countries have continued and are likely to multiply, particularly in the run-up to the 2024 EU elections.

See 10 policy responses from our Future Shocks 2023 study

Highly complex and intertwined risks

The world is increasingly characterised by challenges with cross-sectoral, trans-geographical and global consequences. As volatility in multiple domains grows in parallel, the risk of intertwined crises (or ‘polycrises’) accelerates, i.e. war, natural disasters, geo-economic confrontation, and cost of living, food, energy and other types of crisis. If the different types of crisis not only coincide in time but also persist for a considerable period, this signifies a paradigm of ‘permacrisis’. This calls for a different approach to policymaking, such as systemic and strategic thinking, and the capacity to provide swift policy responses while ensuring long-term sustainability, transparency, democratic oversight, and accountability.

A wide variety of risk reports from 2022 considered that the pandemic was the greatest risk, with climate and environment the next most important, while geopolitical instability was identified as a major possibility. The corresponding reports in 2023 say that, despite the ongoing Russian war on Ukraine, climate change was the most stringent, and that the main risks in the next five to 10 years relate to geopolitical tensions, cybersecurity and energy. Furthermore, AXA identified an imminent inter-relation – a nexus of risks – between climate change, geopolitics and energy. Climate change indeed ranks first as a fundamental risk multiplier, by fuelling energy, food, feed and health risks, which all threaten to set back our progress on economic and human development.

The World Economic Forum warns that the persistence of polycrises is reshaping the world (and Europe), and thus a continued push for resilience in strategic sectors will come at such a high cost that only the most robust economies will be able to endure it. People around the world are becoming more vulnerable to risks and concerned by rising geopolitical tensions, market volatility, growing inflation and the rising cost of living, climate inaction, and the multiplication of health risks (such as antimicrobial resistance, more frequent pandemics, and the rising burden of disease).

The 15 selected risks

EPRS analysts focused on 15 highly probable and high impact risks in the Future Shocks 2023 report – selected from an initial set of around 40 major risks and well-known potential threats – ranging from geopolitics (Russia, China), to climate change (loss of biodiversity, water), energy, health, the economy, cybersecurity, and threats to the democratic information sphere. Less probable risks – but with a potentially very high impact – complete the picture, such as the collapse of the internet, and shocks to financial technology, as this industry may be among the worst-hit sectors amidst the recent market downturn.

Each risk is described in four dimensions: the background to and context for the risk, its possible impact on the EU, scenarios to visualise possible developments, and factors to be considered by policymakers.

There are also several risks that were identified but not developed in a specific chapter of the report, such as instability in the Middle East due to the collision of multiple factors (climate change, security risks, or regional power competition, which all foment instability). Another such risk is that the EU could fall behind in the global race for key technologies, struggling to capitalise on its scientific excellence. A third is food and feed insecurity in Europe, which was a risk selected in Future Shocks 2022.

Linking risks and responses Figure 1: Links between risks and responses, Future Shocks 2023

The selected risks are highly systemic, and many share causal interlinkages and/or exacerbate each other. This can make formulating corresponding policy responses challenging. The 15 risks therefore do not all match the 10 selected responses one-to-one, but the latter cover most elements addressed by the risks. Some responses are clearly tied to one primary risk (i.e. anti-microbial resistance), whereas others are crucial in responding to several risks (safeguarding natural capital to respond to water scarcity and biodiversity loss, but also to energy supply disruption and to promote youth well-being). Some responses simply relate to multiple risks, such as ‘fostering new partnerships’, which addresses geopolitical shifts, migration, energy security, climate change and supply chain risks. Figure 1 visualises some of the links identified and their importance (thickness of the lines).

Outlook for the EU

In a world characterised by upcoming challenges with cross-sectoral, trans-geographical and even global consequences, and with the emerging reality of polycrisis, the EU must continuously monitor all kinds of risks and further develop its resilience and response capabilities. The most recent example of the added value of EU-level action is the continuous cooperation to forge a coalition to help Ukraine withstand the war, which has demonstrated the essential benefits of coordinated and integrated action at both European and national level. This coordination across two governance levels can be considered an important contribution to facing future shocks and to weathering future storms.

Read this ‘at a glance’ note on ‘Future Shocks 2023: Anticipating and weathering the next storms‘ in the Think Tank pages of the European Parliament.

Categories: European Union

Towards gender balance in the European elections: Electoral quotas – What can they achieve?

Mon, 09/04/2023 - 18:00

Written by Ionel Zamfir.

Gender-balanced representation among the decision-makers of the European Union is an important step towards full realisation of the principle of equality between women and men enshrined in the EU Treaties. The Union has made steady and significant progress, starting from a very low presence of women among EU Commissioners and Members of the European Parliament at the time when those institutions were created.

The European Parliament is today one of the world’s most gender-balanced representative assemblies, but there are still significant divergences between EU countries. Several EU countries elect men and women in almost equal numbers, but others are still far away from such a balance. In this context, analysing the tools that have allowed some Member States to fill the gender gap is instrumental for further progress.

One tool stands apart in bringing about change in the most straightforward way: electoral quotas. Quotas can speed up progress significantly, but they are neither an indispensable nor a sufficient instrument for securing balanced political representation. Some countries do well without quotas, while others which do have quotas are still lagging behind. To be effective, quotas must be designed to match the electoral system, and need to be reinforced by rank-order rules. They need to be applied by political parties in a substantive and not merely a formal way, and flanked by other measures to encourage greater participation by women in politics and to induce a change of political culture leading to a more women-friendly environment. Effective sanctions for non-compliance matter, too. Voluntary party quotas are an additional tool and they can also be meaningfully applied in countries with binding quotas. The European Parliament has drafted a legislative proposal to support, among other things, a binding objective of gender balance for European elections, but so far the Council has not endorsed it.

This briefing is one in a series of publications ahead of the 2024 European elections.

Read this briefing on ‘Towards gender balance in the European elections: Electoral quotas – What can they achieve?‘ in the Think Tank pages of the European Parliament.

Categories: European Union

FASTER – Faster and safer tax excess refunds [EU Legislation in Progress]

Wed, 08/30/2023 - 14:00

Written by Pieter Baert (1st edition).

When an EU resident makes an investment in securities in another Member State, the payments received in return (dividends or interest) are normally subject to a withholding tax in the country of the investment (source country), before being subject to tax in the resident’s country. In order to eliminate double taxation, the investor has to submit a refund claim on the excess tax withheld by the source country. Today, however, these relief procedures are cumbersome, unharmonised, and often paper-based. This discourages investors from making investments in another EU Member State, to the detriment of capital markets union and growth of EU businesses. The system also leaves room for fraudsters to claim refunds on taxes they never paid in the first place.

To address this issue, the European Commission tabled the FASTER proposal on 19 June 2023. Under the proposal, Member States would be given a choice between applying either a ‘relief at source’ system and/or a ‘quick refund’ system, with both procedures accelerating and facilitating withholding tax relief for the investor, thereby promoting cross-border investment in the EU. In addition, a number of safeguards to stop tax abuse, in particular cum-ex fraud, are introduced.

The proposal is subject to the special legislative procedure, requiring unanimous support in Council, following consultation of the European Parliament and the European Economic and Social Committee.

Versions FASTER – Proposal for a Council Directive on Faster and Safer Relief of Excess Withholding TaxesCommittee responsible:Economic and Monetary Affairs (ECON)COM(2023) 324
19.06.2023Rapporteur:Herbert Dorfmann (EPP, Italy)2023/0187(CNS)Shadow rapporteurs:Niels Fuglsang (S&D, Denmark)Consultation procedure (CNS) –
Parliament adopts a non-binding opinionNext steps expected: National parliaments’ opinions

Categories: European Union

Hearings of European Commissioners-designate: Iliana Ivanova – Innovation, Research, Culture, Education and Youth

Wed, 08/30/2023 - 08:30

Written by Krisztina Binder, Clément Evroux, Tarja Laaninen and Magdalena Pasikowska-Schnass.

Hearing due to be held on Tuesday 5 September 2023 at 09.30 hours.

European Parliament committees responsible: Industry, Research and Energy (ITRE) and Education and Culture (CULT).

Since 2013, Iliana Ivanova has served as a Member of the European Court of Auditors. She has been a rapporteur for 27 audit assignments, including on topics such as: regional development and cohesion; the Youth Unemployment Initiative and the Youth Guarantee; and the European digital agenda, innovation, digital skills and education. Prior to that, she was a Member of the European Parliament, elected in 2009. As a member of the European People’s Party (EPP) Group, she sat on the Committee on the Internal Market and Consumer Protection and the Committee on Budgetary Control, on the latter of which she served as vice-chair. She also took an active part in the work of the Special Committee on the Financial, Economic and Social Crisis, where she was vice-chair.

Born in 1975, Ivanova studied international economic relations at the University of Economics in Varna (Bulgaria) and holds a Master’s degree in international economic relations from the same institution. She was a coordinator for international financial institutions at the Bulgarian Ministry of Agriculture and Food from 1999 to 2002 and was an investment and business analyst in various financial and banking institutions in the US from 2004 to 2006. She also holds an MBA in Global Management from Thunderbird School of Global Management (Arizona State University, US).

Background

Science, innovation, and youth are closely interlinked. Scientific knowledge is necessary to understand global challenges such as climate change; ensuring young people get a good education and feed into the research and innovation talent pool is key to sustaining the EU’s competitive edge. This contributes to the EU’s ambition to lead the transition to a climate-neutral economy and new digital age. The various components within the ‘Innovation and Youth’ portfolio – namely research, education, culture, youth and sport – have a central role in building a resilient and inclusive society for the future. They are relevant for all EU citizens, be they students, researchers, teachers, parents or professionals, but also medical patients or users of innovative solutions.

Horizon Europe – the EU’s extensive research and innovation programme – supports the EU’s position as a global leader in science, attracting the best ‘brains’ and supporting EU researchers, businesses and innovators. As an interface between scientific research and industrial policy, innovation policy aims to create a conducive framework for bringing ideas to market, ensuring the capacity of EU innovation ecosystems to experiment and deploy their innovative solutions.

Education and training policy has gained momentum at EU level, working towards making the European Education Area (EEA) a reality by 2025, and thus creating a common space for quality education and lifelong learning for all. The COVID-19 pandemic posed unprecedented educational challenges affecting around 100 million learners and teachers across Europe. It highlighted the crucial importance of multilateral cooperation, knowledge-sharing, and inclusive and accessible digital education. Russia’s war of aggression against Ukraine also had a profound impact, and mobilised the EU to support the education of displaced Ukrainian children and youth.

Europe’s creative and cultural industries employ around 7.4 million people (down 10 % due to the pandemic) and are instrumental in promoting Europe’s cultural diversity around the world. EU countries account for nearly 40 % of UNESCO’s World Heritage sites, and eight in 10 EU citizens say that they take pride in Europe’s cultural heritage. The EU is tasked with a variety of missions: protection and promotion of cultural and linguistic diversity, advancement of cultural exchanges, support of artists’ mobility, etc. EU youth strategy aims to foster the participation of young people, while sport improves mental and physical wellbeing and has a substantial economic and social impact. Sport can also be a valuable tool to engage with various social groups.

Recent developments

The EU’s position as a leading knowledge-based economy relies on its ability to generate and transform world-class science into innovation that ultimately allows the creation of new markets, more skilled jobs and a better quality of life. Regulation (EU) 2021/695, establishing Horizon Europe, factors in these complementary objectives. On 1 July 2023, with at least 7 694 grants signed (each corresponding to one project), the EU had already invested €21.36 billion as its net contribution to these projects. Whereas the university sector represents the majority of participants, private for-profit entities represent more than 30 % of participants. The collaborative approach is especially beneficial for small and medium-sized enterprises, and for the 15 Member States indicated in the legal basis as ‘widening countries’ (BG, CY, CZ, EE, EL, HR, HU, LT, LV, MT, PL, PT, RO, SI and SK). In 2022, the number of grants signed that included at least one ‘widening’ legal entity almost doubled.

In 2021, the new Erasmus+ programme, with strengthened priorities in areas such as inclusion and diversity and striving for carbon-neutrality, kicked off with nearly twice the budget of its predecessor programme. The European Universities networks, comprising 430 higher education institutions from 35 European countries, are set to enable students to obtain a degree by combining studies in several countries. The Commission’s 2022 report on progress towards achieving the EEA looked at the ongoing work and accomplishments such as the adoption of Council recommendations on learning for sustainability and micro-credentials and the launch of the Erasmus+ Teacher Academies. The implementation of the higher education package is under way. Similarly, the implementation of the 2020 digital education action plan (DEAP) is ongoing, with key actions already completed. Total EU expenditure on education and training is expected to triple between 2021 and 2027 compared to the previous budget period, and in 2022 the Commission launched the Learning Lab on investing in quality education and training to make investments in education more effective.

The New European Agenda for Culture, adopted in 2018, is the current framework for cooperation on cultural policy at EU level. It strives to bring together the economic and social aspects of culture in a globalised world, taking into consideration the digital and green transitions. The Creative Europe programme continues to support cultural and creative sectors in the 2021-2027 period, through cooperation projects connecting artists across Europe.

2022 was designated the European Year of Youth, with the aim of boosting involvement of young people in Europe’s democratic life, as well as mainstreaming youth policy across all relevant Union policy fields. Funding for sport is available in the form of a specific chapter in Erasmus+, serving to combat doping, match-fixing, violence and discrimination. It also contributes to health-enhancing activities, grassroots sport and equal opportunities.

Priorities and challenges

The budget for 2021 to 2027 increased resources for Horizon Europe (€100 billion), Erasmus (€30 billion) and Creative Europe (€2.44 billion, 50 % increase). This is an indication that research and education policies have not only maintained their relevance, but have gained in importance.

To achieve the European Research Area (ERA), the 2021 Commission communication identified four key objectives: prioritising investments in research and innovation (R&I), improving access to excellence, translating R&I results into the economy, and deepening policies that promote the free circulation of knowledge. Member States and the EU were invited to develop synergies between the ERA and EEA, to harness knowledge as a foundation for democratic, resilient and inclusive societies.

As work towards achieving the EEA continues, including the expected adoption of a Commission proposal on learning mobility, challenges such as inequality in education and widespread teacher shortages need to be addressed. For the green and digital transitions, the education and training sector has to be prepared to provide the knowledge and skills, including digital skills and sustainable education, that citizens need to cope with change. Promoting women’s participation in the digital and STEM fields, and fostering excellence and innovation in higher education, are of particular importance. The EEA mid-term review process is being carried out this year, and a review of the DEAP is envisaged in 2024. For Erasmus+, the Commission has to carry out an interim evaluation of the 2021-2027 programme and a final evaluation of the 2014-2020 programme by the end of 2024.

The European youth strategy will also be evaluated in 2023. There should be a meaningful legacy from the European Year of Youth 2022 (EYY2022), and a proper follow-up of the demands raised during the EYY2022 and the Conference on the Future of Europe – including a possible ‘Youth test’ for future EU legislative proposals. Young people from all walks of life need to be better represented in the structured dialogue with EU decision-makers.

Creators, cultural entrepreneurs and legislators alike face the digital transformation, accelerated by the COVID-19 related lockdowns, which were particularly onerous for cultural sectors. As a result, new business and monetising models emerged, changing already fragile work environments and employment conditions, and blurring national borders. Tackling this new challenge as well as globalisation in general has required increased focus on preserving the richness and diversity of European culture. Linked to this is the need to foster awareness of Europe’s shared cultural heritage, history and values, to help instil a sense of belonging to the EU’s integration project. Defence of multilingualism requires reflection on improving the digital presence of minority and regional languages.

Physical inactivity is also a growing concern, with a 2018 survey showing that 46 % of respondents never exercise or play sport. Efforts to try and reverse this trend need to be sustained.

European Parliament Treaty basis and European Parliament competence
The EU and Member States have shared competence in the area of research and innovation (Articles 179-188 of the Treaty on the Functioning of the European Union, TFEU). Policies in the area of education, vocational training, youth, culture, the audiovisual sector and sport are essentially decided and implemented by the Member States (Articles 165-167 TFEU). The EU’s role is one of support and coordination, with harmonisation of laws and regulations being specifically excluded. Respect for linguistic diversity and the protection of cultural heritage are enshrined in Article 3 of the Treaty on European Union (TEU).

Parliament has consistently stressed the importance of adequate funding for education, research, culture, youth and sport. Parliament successfully proposed to nearly double funding for Creative Europe 2021-2027. During the negotiations with the Council on the regulation establishing the Erasmus+ programme for 2021 to 2027, Parliament obtained an additional €1.7 billion (in constant 2018 prices). Parliament also insisted on concrete measures to secure the inclusion of young people with fewer opportunities, and emphasised the importance of fostering active citizenship and European identity through the programme. During a May 2023 exchange of views with the Commission on its 2023 annual work programme, members of Parliament’s Committee on Culture and Education (CULT) expressed concerns about the impact of rising living costs on beneficiaries, and about problems with the programme’s IT environment.

Parliament has emphasised that the EEA should play a crucial role in improving access to quality education, and be a milestone in the recognition of diplomas and qualifications across the EU. Parliament requested the development of a strategy and common framework on citizenship education with a European dimension, and stressed the importance of establishing academic freedom as a core principle of the EEA. Parliament has also stressed the need to close the digital divide, and has highlighted the importance of modernising vocational, education and training systems to provide the skills needed for the green and digital transitions. Parliament has emphasised the need for better recognition of the teaching profession, and deems it imperative that teachers’ professional development be supported.

In an April 2022 resolution, Parliament called on the Council and the Commission to give it a stronger role in managing association agreements signed under Horizon Europe. Regarding Russia’s war on Ukraine, it called on the Commission to develop calls for projects under Horizon Europe to strengthen the Ukrainian scientific sector and boost cooperation between the EU and Ukraine.

Further reading

Binder K, Taking stock of progress towards the European education area, EPRS, European Parliament, January 2023.

Evroux C., The EU’s global approach to research and innovation, EPRS, European Parliament, March 2023. Evroux C., Upcoming interim evaluation of Horizon Europe, EPRS, European Parliament, July 2023.

Read this briefing on ‘Hearings of European Commissioners-designate: Iliana Ivanova – Innovation, Research, Culture, Education and Youth‘ in the Think Tank pages of the European Parliament.

Categories: European Union

Revision of the Port State Control Directive [EU Legislation in Progress]

Tue, 08/29/2023 - 14:00

Written by Karin Jacobs (1st edition).

On 1 June 2023, the European Commission presented a legislative package to modernise and reinforce maritime rules on safety and pollution prevention. This package contains proposals for the revision of five legal acts, among them the Port State Control Directive (PSCD). The aim is to update these acts so that they are in line with the requirements of the International Maritime Organization and the regional organisation for port state control established under the Paris Memorandum of Understanding (MoU). The directives should also harness the potential offered by new technologies.

The proposal for a revision of the PSCD, which is the specific topic of the present briefing, focuses on port state control (PSC) – one of the two pillars of maritime safety – the other one being compliance with flag state rules. PSC is the inspection of foreign ships in national ports to verify that the ships’ condition complies with international regulations, including for crews. The PSCD would be extended to cover additional international rules, such as new conventions on ballast water and removal of wrecks, as well as updated rules under the Paris MoU. It would attach greater importance to the environmental performance of ships in determining their risk profile. Additionally, it would boost the Member States’ capacity to detect and address cases of non-compliance with standards and rules on safety, environmental protection and pollution prevention. The scope of the directive would be extended to fishing vessels, and PSC-related operations would need to be digitalised.

Within the European Parliament, the Committee on Transport and Tourism (TRAN) is leading the work on this legislative file. The Committee on Fisheries (PECH) has been invited to provide an opinion.

Versions Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/16/EC on port State Control, COM(2023)271 finalCommittee responsible:Transport and Tourism (TRAN)COM(2023) 271
1.6.2023Rapporteur:Vera Tax (the Netherlands, S&D)2023/0165(COD)Shadow rapporteurs:Ljudmila Novak (Slovenia, EPP)
Pierre Karleskind (Renew, France)
Clare Daly (The Left, Ireland)Ordinary legislative procedure
(COD) (Parliament and Council
on equal footing – formerly ‘co-decision’)Next steps expected: Publication of draft report

Categories: European Union

Revision of the Flag State Requirements Directive [EU Legislation in Progress]

Tue, 08/29/2023 - 08:30

Written by Karin Jacobs (1st edition).

On 1 June 2023, the Commission presented a maritime safety package, including a proposal on a revised directive for compliance with flag state requirements. Revision of the rules is needed to take account of digitalisation, better inspections, improved cooperation between flag states, and alignment with international rules. Every flag state must ensure that its registered fleet complies with international standards on safety, pollution prevention, and working conditions, through inspections and surveys. This is considered the first line of defence in ensuring that EU flag states discharge their international law obligations with respect to ships flying their flags.

The current proposal would cover requirements for flag state inspections, based on International Maritime Organization (IMO) rules. The objective is to improve maritime safety and reduce the risk of environmental pollution, ensuring that EU flag states continue to provide high quality shipping services. The proposal facilitates information sharing between flag states on the results of inspections and compliance issues in general. The European Maritime Safety Agency (EMSA) is to support this cooperation through revised training programmes for flag state inspectors.

The Transport and Tourism Committee (TRAN) is leading the European Parliament’s work on this legislative file. The Committee on Fisheries (PECH) will prepare an opinion.

Versions Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/21/EC on compliance with flag State requirementsCommittee responsible:Transport and Tourism (TRAN)COM(2023) 272 final
1.6.2023Rapporteur:Vera Tax (the Netherlands, S&D)2023/0172(COD)Shadow rapporteurs:Ljudmila Novak (Slovenia, EPP)
Pierre Karleskind (Renew, France)
Clare Daly (The Left, Ireland)Ordinary legislative procedure
(COD) (Parliament and Council
on equal footing – formerly ‘co-decision’)Next steps expected: Publication of draft report

Categories: European Union

Future Shocks 2023: Defending the EU’s democratic information sphere

Thu, 08/24/2023 - 18:00

Written by Naja Bentzen.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

The democratic information sphere has undergone a rapid and profound evolution over the course of the past two decades. The public space for debate – where we not only express our opinions, but also form our opinions, which feeds into our individual and collective decision-making – has the potential to unite, but also to divide people. This complex, multi-layered ecosystem is shaped and impacted by a vast number of strategic and systemic actors, where interests sometimes dominate over democratic values and freedoms.

  • Geostrategic threats: Foreign information manipulation and interference (FIMI) – conducted in an intentional and coordinated manner – aims to manipulate political views and preferences through deceptive information. Actors engaging in FIMI are typically authoritarian state or non-state actors, including proxies inside and outside their own territory. Russia, China and Iran are among the most visible and increasingly aggressive actors. These actors coordinate their narratives – typically designed to undermine democracy – and export their tools to other countries and continents. They also use proxies, including outside their territory, to further their goals while maintaining deniability. Increasing efforts to game – and thereby undermine – the multilateral system, with the United Nations as a prominent example, is part of the strategic erosion of international decision-making processes.
  • Undermining the integrity of elections – and thereby public trust in the electoral system and democratic institutions – erodes democracy as a system. Two key elections in 2024 – for the European Parliament in June and the US elections in November – will create ample opportunity for information campaigns and interference by authoritarian actors, both with a view to distracting from their own failures and to achieving a certain desired outcome. US domestic political polarisation could play into this.
  • Systemic threats: Distortion of the information space – impacting public opinion as well as individual and collective decision-making – through filtering, ranking and recommendation of content and interactions (for example, via newsfeed algorithms, de/prioritisation or removal/amplification of content and accounts). Engagement is generated by algorithms that prioritise polarising content over facts, pushing users towards extremes (‘algorithmic radicalisation’). This is, at least partly, a consequence of the business models of platforms that dominate the online ecosystems.
  • Societal vulnerabilities: Interlinked with systemic and strategic threats, societal weaknesses increase vulnerability to manipulative information, which uses emotional content to trigger and maintain engagement; people are more prone to deceptive messages if they feel that the system is not working for them. Mental health issues – in part triggered by social media and accelerated by the pandemic – have created a profound risk of harm to children and youths. This could feed into a vicious circle of addictive behaviour and vulnerability to deceptive information, with algorithmic curation pushing some people towards extremist messaging. Computer games are increasingly used by extremist actors to groom and radicalise users.

Across the world, there is increasing awareness of and concern about deceptive narratives spread by a growing number of state and non-state actors and enabled by global tech companies. Correspondingly, the need to find cross-border responses that take different aspects and actors into account is pressing. Globally, the EU has the potential – via its important internal market and its standard-setting power (the so-called ‘Brussels effect’) – to promote, represent and defend its democratic values, extending far beyond Europe. However, international and multilateral cooperation to tackle the multidimensional threats from actors who supply and enable information manipulation is facing a number of challenges.

Figure 51 – Proportion who saw false or misleading information about each topic in the last week – selected regions

At the same time, efforts to reduce the demand for deceptive narratives in a strategic manner would require pre-emptive responses to predictable developments. This includes addressing drivers of polarisation such as growing economic inequality – a key perceived threat to democracy – as a result of job losses to AI-powered services. This could, as similar developments have done in the past, further exacerbate status anxiety; the fear of downward mobility that historically risks providing fertile ground for authoritarian tendencies and messaging. Moreover, there are increasing calls for digital and media literacy across generations (not only young people) to equip people to detect deceptive tactics, a threat that is expected to be exacerbated by AI-powered information manipulation.

At their December 2022 summit, the EU and the US agreed to promote their values worldwide via an open, free, global, interoperable, reliable and secure internet, as reflected in the Declaration for the Future of the Internet, which has been signed by more than 70 partners so far, including the EU and its Member States. Moreover, they agreed to seek to eliminate the use of arbitrary and unlawful surveillance that targets human rights defenders. Transatlantic cooperation on internet freedom and internet governance – including within the UN framework, which would include the Member State level – will be key to advancing democratic norms and standards. As the importance of transatlantic cooperation to respond to the evolving threats to our joint information sphere will continue to grow, it will be crucial to counter the repercussions of the growing polarisation and what some experts call ‘truth decay’ in the US, which can affect legislative responses, including in Congress, and call into question important institutions involved in this work.

Position of the European Parliament

Foreign information manipulation and interference: The European Parliament has consistently, and with broad political consensus, been pushing the issue of a European response to information manipulation and foreign interference to the top of the agenda, urging the EU to provide sufficient tools and resources to respond adequately and in a coordinated manner. Most recently, the second Special Committee on foreign interference in all democratic processes of the European Union, including disinformation, and the strengthening of integrity, transparency and accountability in the European Parliament (ING2), have significantly increased the visibility of the related threats, and broadened and deepened the understanding of and focus on the interlinked challenges. The scope of ING2 was further expanded in early 2023 to include threats to Parliament’s integrity and transparency. Parliament’s strategy for the 2024 elections includes a focus on preventing and addressing information manipulation, without interfering in the political or wider social debates, with full respect for the independence of the Members’ mandate.

Stricter rules on political advertising: Parliament’s mandate for negotiations with the Council proposed a number of changes to the Commission’s proposal – for example, excluding political views expressed under editorial responsibility from the concept of ‘political advert’. MEPs also proposed banning the financing of political advertising services by non-EU sponsors that reside or are located outside the EU. Moreover, they called for easy access of citizens, authorities and journalists to information on political advertisements, including creating an online repository for online political advertisements and related data. Additional changes include reinforcing obligations for providers of political advertising services in the last month preceding an election or a referendum, banning the use of targeting and ad delivery techniques involving processing of sensitive personal data, and limiting the use of those techniques when they involve the use of non-sensitive personal data.

Artificial Intelligence and information manipulation: In June 2023, the European Parliament adopted its negotiating position on the Artificial Intelligence Act (AI Act); MEPs expanded the list of high-risk AI systems, adding AI systems to influence voters in political campaigns and in recommender systems used by social media platforms (with more than 45 million users) under the Digital Services Act (DSA). According to Parliament’s position, generative foundation models, like GPT, would have to comply with additional transparency requirements. This would mean disclosing that the content was generated by AI, designing the model to prevent it from generating illegal content, and publishing summaries of copyrighted data used for training. Furthermore, Parliament wants to impose an obligation on providers of foundation models to ensure robust protection of fundamental rights, health, safety, the environment, democracy and the rule of law. MEPs also added safety mechanisms by making it easier for citizens to file complaints about AI systems and receive information about decisions based on high-risk AI systems that impact their rights. Moreover, MEPs proposed to set up an EU AI Office with its own legal personality, funding and staff. The EU AI Office would be tasked with monitoring the implementation of the AI Act.

European Media Freedom Act (EMFA): Parliament’s Committee on Culture and Education (CULT) presented its draft report on the EMFA on 26 April, with the deadline for amendments set for 5 May 2023. The CULT committee’s draft report sparked criticism from a number of prominent European media freedom groups (see below). The vote on and adoption of the report in the CULT committee is planned for September 2023, followed by a vote in plenary, possibly in October 2023.

In focus: Foreign information manipulation and interference
Following the creation of the European Parliament’s Special Committee on Foreign Interference in all Democratic Processes in the European Union, Including Disinformation (INGE), the European External Action Service (EEAS) developed the concept of foreign information manipulation and interference (FIMI). The visibility of the threats related to FIMI increased during the pandemic and were further exacerbated by Russia’s full-scale war of aggression against Ukraine, launched in February 2022, as well as the global repercussions of the escalating information war. The capacity of the EEAS to address related challenges has expanded significantly since 2015, when the problem first appeared on the EU’s political agenda. In addition to a more precise understanding and diagnosis of the problem – from ‘fake news’, to ‘disinformation’, to FIMI – the EEAS has been developing and improving the means to prevent, deter and respond to FIMI. It has done so in close contact and collaboration with other EU institutions, Member States, international partners such as the G7 and NATO, civil society organisations, academia, journalists, media and private industry. In addition, the three Strategic Communications Task Forces cover and help respond to FIMI activity in the Eastern Partnership, the Southern Neighbourhood and the Western Balkans. The EEAS is also working to protect its common security and defence policy (CSDP) missions abroad and build the capacities of EU Delegations to address FIMI.

Figure 52 – Pyramid of instruments at the disposal of the EU and its Member States EU policy responses (Commission and Council responses so far)

Foreign information manipulation and interference: The actions by the EEAS to counter FIMI constitute the core executive response to related threats. Since 2015, the EEAS has been the key EU driver behind actions to counter (Russian) disinformation, and continues to expand its remit as the main actor in developing and implementing measures and actions in line with the evolving understanding of the threats to the EU. This work feeds into the EU’s overall framework to tackle FIMI, in particular through the evolving FIMI toolbox.

Building on the 2020 European democracy action plan, the 2022 Strategic Compass called for the EEAS to further develop the EU’s FIMI toolbox, and include this in the CSDP missions and operations. In July 2022, the Council welcomed the FIMI toolbox and called for more systematic use of the full range of available tools, such as situational awareness – among others, through the Rapid Alert System and the Single Intelligence Analysis Capacity, in particular its Hybrid Fusion Cell. Most recently, the defending democracy package – announced in February 2023 – aims to cover the review of the implementation of the European democracy action plan and look into ways to further strengthen democratic resilience, taking into account the recommendations of the Conference on the Future of Europe.

Media freedom: Reflecting the acknowledgement that complementary tools are needed at EU level to counter growing politicisation of the media in some Member States, the Commission presented the EMFA in September 2022, together with a recommendation. The proposed EMFA builds on the Audiovisual Media Services Directive and seeks to set rules to protect media pluralism and independence in the EU, including safeguards against political interference in editorial decisions. In the Council, the proposal is being discussed within the Audiovisual and Media Working Party; a progress report was presented in November 2022 and a second one in May 2023 at the Education, Youth, Culture and Sport Council. In the Parliament, the draft legislative report was presented in the CULT committee in April 2023. A vote on and adoption of the report in the CULT committee is planned for September 2023, and Parliament will possibly vote in plenary in October 2023.

Addressing vulnerabilities: The Commission funds the Radicalisation Awareness Network (RAN) – an umbrella network for practitioners working on preventing radicalisation and violent extremism across Europe. RAN facilitates the exchange of ideas, knowledge and experience among field experts, social workers, teachers, NGOs, civil society organisations, victims’ groups, local authorities, law enforcement authorities and academics. Within RAN, a special Communication and Narratives Working Group (C&N) focuses on online and offline communication that counters extremist propaganda and/or challenges extremist ideas.

Political advertising: In the context of its 2020 European democracy action plan, the Commission announced its intention to complement the rules on online advertising included in the DSA through a legislative proposal on sponsored political advertising. The proposal was presented by the Commission on 25 November 2021 and draws on previous EU initiatives to ensure greater transparency in political advertising. Trilogue negotiations are ongoing.

Artificial Intelligence: The Commission unveiled a proposal for a new AI Act in April 2021, aiming to enshrine in EU law a technology-neutral definition of AI systems. The proposal tailors the rules according to four levels of risk: unacceptable, high, limited and minimal. ‘Unacceptable risk AI’ – harmful uses of AI that contravene EU values (such as social scoring by governments) – will be banned. ‘High-risk AI’ refers to systems that adversely impact people’s safety or their fundamental rights. The proposal envisages transparency obligations for systems that (i) interact with humans, (ii) are used to detect emotions or determine association with (social) categories based on biometric data, or (iii) generate or manipulate content (‘deep fakes’). People must be informed if they interact with an AI system, or if their emotions or characteristics are recognised through automated means. If an AI system is used to generate or manipulate an image or audio or video content that appears authentic, there should be an obligation to disclose that the content is generated through automated means, with exceptions for legitimate purposes (law enforcement, freedom of expression). This would allow people to make informed choices or step back from a given situation. In June 2023, the Commission called on online platforms that are part of its strengthened code of practice to identify and label AI-generated content to tackle disinformation, to make it easier for people to spot manipulated information.

Transatlantic cooperation: The EU-US Trade and Technology Council (TTC) was created in 2021 as a key forum for EU-US coordination on key trade and technology issues to include transatlantic cooperation based on shared democratic values in line with the 2020 ‘new EU-US Agenda for Global Change‘ (JOIN(2020) 22 final). According to the joint statement issued after the fourth ministerial meeting in Luleå on 30-31 May 2023, the EU and US agreed on shared standards for structured threat information exchange and on a common methodology for identifying, analysing and countering FIMI, to be made available to stakeholders globally. Moreover, the EU and the US agreed to explore ‘further support for capacity building’ in countries in Africa, Latin America and the EU Neighbourhood to counter FIMI. TTC cooperation also includes a call to action for online platforms operating in Africa, Latin America and EU Neighbourhood countries to ensure the integrity of their services and to effectively respond to disinformation and FIMI, building on the example of the EU’s code of practice on disinformation.

The EU and the US also reaffirmed their commitment to a risk-based approach to AI to advance trustworthy and responsible AI technologies, and agreed to treat generative AI as a matter of urgency and to work together to swiftly produce a draft Code of Conduct for AI to be signed on a voluntary basis, including by governments from other regions. This comes in the wake of the launch of OpenAI’s ChatGPT in November 2022, which prompted mounting calls – including in the US – to urgently regulate AI. Although a number of prominent US tech actors have called for a moratorium on training large AI systems, the sector and its investors appear at the same time to be engaged in an ‘arms race’ on AI that has accelerated dramatically since the launch of ChatGPT.

Figure 53 – Timeline on defending the EU’s democratic information sphere Obstacles to implementation of response Geostrategic obstacles

In the face of increasing pressure on the democratic information sphere – including strategic pressure from foreign authoritarian actors who are increasingly cooperating to undermine liberal democracies – the importance of multilateral, international and transatlantic cooperation will continue to grow. At the same time – also given the important role and visibility of the European Parliament and the US Congress, especially in the context of the upcoming elections in 2024 – threats to and setbacks for democracy on both continents can impact not only the overall credibility of democracy as a system, but also hamper global efforts to counter information manipulation and strengthen the joint information sphere. Moreover, AI-driven surveillance tools – putting journalists at risk of automated suppression – could further exacerbate this crisis of the democratic information sphere.

A related dimension of the multispectral threats to the information sphere is the practical, strategic cooperation on and export of internet censorship and surveillance tools from authoritarian actors such as China and Russia, which is furthering these countries’ geostrategic interests by normalising the use of these technologies and standards. Against this backdrop, coordinating responses both within the EU and with like-minded partners – including NATO and the G7, as well as within the UN framework – will be of increasing importance, especially in the face of what appears to be growing coordination between authoritarian actors regarding the spreading of deceptive narratives. The push for more accountability and for the strengthening of democratic values in the information sphere has become an integral part of EU diplomacy in recent years. The pressure on democracies from within will continue to challenge transatlantic and international cooperation and coordination, likely making these efforts even more delicate.

Given the broad scope and the variety of actors involved in strategic and systemic challenges to the information sphere, one of the greatest obstacles to achieving a coherent and holistic response in the future will be coordination and – linked to this – an adequate level of trust between key actors that should drive the global response. Such trust issues can be further exploited and weaponised by external authoritarian state actors with a geostrategic interest in weakening the democratic response to information manipulation and interference. Internationally, differing interests can slow down or hamper the efforts to rein in some of the market forces that contribute to polarising debates. Moreover, political forces in the US that also contribute to polarising debates could hamper transatlantic efforts to counter deceptive narratives.

FIMI: Creating or amplifying fissures within democratic countries has been part of the Kremlin’s toolbox for years. The use of proxies to create plausible deniability and export narratives and tools to non-state actors, including within democracies, are fixtures in the authoritarian playbook. The mandate and strategic priorities of the EEAS limit the institutional focus and implementation of measures against state actors, notably Russia and China. However, given the blurring boundaries between state- and non-state actors, and between domestic and foreign actors, the strict focus on certain countries makes it easier for such state actors to exploit grey areas.

Systemic obstacles

Transatlantic tensions over tech regulation: In May 2023, two rulings by the US Supreme Court decided, in line with the big tech companies’ position, not to deviate from the immunity principle granted to internet providers for the content they channel under Section 230. These rulings make it clear that it is the internet service provider’s ‘house rules’ rather than public authorities or lawmakers that governs what is objectionable. In a separate development on the other side of the Atlantic, the EU’s decision in May 2023 to fine Meta €1.2 billion for privacy violation exemplifies the persistent gulf between democratic values and freedoms on data privacy. Ongoing issues in Twitter under Elon Musk’s leadership have brought the clash between corporate interests and democratic values to the fore, most recently in the company’s decision in May 2023 to leave the EU’s voluntary code of practice on disinformation. Other online platforms have also cut staff and scaled back on content moderation: Meta’s decision before the launch of Threads – a new platform that amassed over 100 million users in five days – to lay off global staff working to counter disinformation and coordinated troll campaigns has sparked concern over potential new waves and avenues for information manipulation ahead of the important 2024 elections in the US and Europe.[i] The focus in Washington on securing the US’s competitive and strategic edge vis-a-vis China could be increasingly used as an argument to push back against EU regulation.

Threats to the implementation of the DSA: Some stakeholders have expressed concern that exemptions for media content in the EMFA – which is still under negotiation – could undermine the implementation of provisions in the DSA that would otherwise make online platforms responsible for content moderation. Under this exemption, if any self-declared ‘media’ published false information via Twitter, Facebook or TikTok, the platforms would need to contact the ‘media’ and inform them about a fact check or takedown, which would, in practice, prevent timely and effective content moderation of viral disinformation.

As part of the broad spectrum of systemic obstacles, economic threats to the online media ecosystem – as noted by the European University Institute (EUI) – require action, although they go beyond the scope of the EMFA: ‘economic threats that have increased in the online ecosystem of the media, in which the resources that are used to finance the media content providers – advertising – are increasingly gathered by the digital intermediaries’. The EMFA does not address public subsidies to the media, ‘neither calling for them nor addressing the related risks of political interference’. The authors note that the Digital Markets Act – covering the data and online advertising market – and EU financial support programmes for the media sector address the issues, but recommends using the EMFA as an opportunity to coordinate legislative and regulatory tools.

Societal obstacles: On the demand side of viral deceptive content, anxiety, loneliness, stress and declining trust in media, democratic institutions and political leaders can increase the vulnerability of citizens to deceptive, emotional messages. Societal grievances – creating fertile ground for deceptive information campaigns – could be further exacerbated by increased climate change-driven migration, increased inequality as a result of inflation and economic crises, as well as massive job losses as a consequence of the rollout of AI large language models (LLMs). According to some estimates, 40 % of working hours could be impacted, which could result in a significant decline in clerical or secretarial roles, according to the World Economic Forum. At the same time, copyright issues, combined with the abundance of information online, news avoidance – connected with overabundance of information of fluctuating quality – and declining ad revenues for news media, could accelerate the mounting pressure on journalism.

Policy gaps and pathway proposals

Given the cross-border nature and broad spectrum of information manipulation, following emerging narratives from multiple actors – beyond the ‘usual suspects’ such as China and Russia – would better equip the EU to prebunk rather than debunk deceptive information once it has already started to spread. Since one democratic country’s domestic actors can be another country’s foreign actors, expanding the mandate of the EEAS – which, by nature, is limited to external actors – to take the global, cross-border and multiactor threats into account would facilitate the forecasting of information threats. Strategic foresight to pre-empt future corrosive narratives and which shares not only findings, but also forecasts, with the public can – in combination with media and information literacy, targeting all age groups – strengthen prebunking efforts to boost collective cognitive resilience.

Imposing costs on state actors that engage in FIMI hinges on attribution capacity. The final ING2 report on FIMI, adopted on 1 June 2023, proposed that the FIMI toolbox should include a specific sanctions regime on FIMI as well as measures to strengthen the attribution capacity of European institutions and national governments. MEPs underlined the corrosive phenomenon of disinformation-for-hire, services to government and non-government actors – typically via the dark web – to attack electoral processes and called for a permanent body in the European Parliament to ensure effective monitoring. Moreover, they called for increased protection for media and journalists who are targeted by foreign powers to undermine the right to information, as well as ‘mirror clauses’ where the openness of the European information space would depend on access given to European media in other countries. In addition, MEPs called for an EU-wide regulatory system to prevent editorial control of media companies by foreign governments, and to prevent foreign high-risk countries from acquiring European media companies, using existing foreign direct investment screening mechanisms.

Coordination is key to successful cooperation at all levels – intergovernmental, interinstitutional, and with all relevant stakeholders. To this end, in February 2023 the EEAS proposed to standardise information on threat actor behaviour and infrastructure, including ensuring a consistent framework for sharing insights on FIMI incidents. Moreover, the EEAS proposed the creation of Information Sharing and Analysis Centres (ISACs) – trusted entities to foster information sharing and good practices on threats and mitigation – to pool insights from the organisations that identify and expose manipulative activity using common frameworks and standards.

Election integrity: Ahead of the European Parliament elections in May 2024, followed by the US elections in November 2024, efforts to encourage EU and Member State election candidates and parties to make pledges of electoral integrity, and political incumbents to pledge not to engage in online manipulative practices, could be promoted to candidates, parties and stakeholders in the US.

AI pact until the AI Act can be applied: European Commissioner for the Internal Market Thierry Breton – following a meeting with Sundar Pichai, CEO of Google and its parent company Alphabet – announced on 24 May 2023 the decision to develop a voluntary AI pact with European and non-European companies to bridge the time until the EU’s AI Act is ready for implementation.

Media legislation: In January 2023, the European Broadcasting Union called on the EU to ‘ensure that the final EMFA will help to tackle threats to media independence and improve audiences’ ability to access the media that matters most to them, both offline and online’ by protecting and promoting the independence of media and journalists; ensuring that citizens can easily discover and find media services of general interest; and tackling arbitrary behaviour by global platforms towards media content.

In a 10-point plan to address our information crisis, the 2021 Nobel Peace Prize laureates and journalists Maria Ressa and Dmitry Muratov called on the EU to ensure that no media exemption be included in any tech or media legislation. The EUI recommended using the EMFA as an opportunity to coordinate legislative and regulatory tools, including the Digital Markets Act, covering data and online advertising.

The CULT committee’s draft report on the EMFA sparked criticism from a number of prominent European media freedom groups, citing in particular the removal of almost all references to editorial independence in the proposal and the insertion of media owners’ right to assume a leading editorial role (Article 6.2); the insertion of VLOPs into the media plurality assessment and the exchange of a mandatory nature for a voluntary one (Article 21); and the failure to strengthen media ownership transparency rules (Article 6.1).

Reduce societal vulnerabilities in a strategic manner: Using the security lens, address the root causes of divisions and vulnerabilities, including increasing economic inequality, partly caused by structural job losses.

Boosting inclusive participatory democracy: In addition to other diplomatic efforts to promote democracy, the EU could initiate a Conference on the Future of Democracy – building on the experience from the Conference on the Future of Europe – as a global exercise in participatory democracy to engage citizens worldwide in a debate on challenges to democracy, as well as potential solutions.

Transatlantic cooperation: Big tech companies and internet providers – many of them from the US – play a key role in advancing or hampering democratic norms and standards. Increased cooperation between the US and the EU – including in the EU-US Trade and Technology Council – to manage the inherent tension between interests and values at the intersection of government and the corporate sector will be key to sustaining democratic norms and standards in the long term. Such efforts will include investment in technologies that further internet freedom in the face of rampant internet censorship and surveillance – the flipside of authoritarian (state) efforts to manipulate the information sphere.

Strengthening the global information sphere and increasing cooperation and coordination with like-minded partners to boost the media ecosystem in third countries: Within the Global Gateway framework, the EU – in cooperation with like-minded democracies, including the US, the UK, Australia, Japan and Canada – could increase strategic investment in strengthening the media ecosystem across the world, including making European news agency services available to local and regional media in the ‘Global South’. Moreover, the EU could invest strategically in local news in its neighbourhoods and across the world, coordinating with and complementing ongoing efforts by democratic allies. Boosting the media and information landscape, including in sources that provide access to general-interest knowledge (for example, verified encyclopaedias) in key languages spoken in and beyond Europe – including Spanish, French, Arabic and Russian – could contribute to collective cognitive resilience not only within the EU, but also in third countries.

Multilateral cooperation: Close coordination within the UN on a future Global Code of Conduct for Integrity in Public Information could improve the chances that democracies gain an edge over the increasing autocratic coordination within the UN system that would further weaken multilateral and international decision-making. In this context, the EU could boost its diplomatic efforts to promote democracy, including promoting responsible state behaviour online. The European Parliament – as a flagship for multinational democracy, and with its significant tradition of support for democracy in mind – could play a more visible role in promoting the parliamentary dimension of such a push.

Possible action
Categories: European Union

Future Shocks 2023: Delivering economic recovery and resilience

Tue, 08/22/2023 - 18:00

Written by Martin Höflmayr and Magdalena Sapała.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

The pandemic, the war in Ukraine and related supply shocks have tested Europe’s economic resilience and simultaneously increased the pressure to respond to critical challenges. They range from the need to accelerate the green and digital transition, diversifying energy supplies, to the necessity to provide support to Ukraine. To address them, the EU uses existing and newly created initiatives. Prominent among these are the Next Generation EU (NGEU) post-pandemic recovery instrument, with a rich package of reform and investment under the Recovery and Resilience Facility (RRF), and the REPowerEU plan to reduce energy dependence on Russian fossil fuels. Further ambitious projects, such as the Green Deal Industrial Plan supporting investments for a clean energy economy and the European Sovereignty Fund (see box below), are also in the pipeline. For Ukraine, the EU has mobilised significant political, humanitarian, economic and military assistance and, by granting it EU candidate status, has opened a path towards the future recovery and reconstruction of the country.

All these initiatives require substantial, and increased, financial expenditure. As a result, there is a multi-dimensional pressure on the EU’s financial capacity to act. Although the budgetary package agreed under the 2021-2027 multiannual financial framework (MFF) and NGEU is unprecedented in terms of size (€1 210.9 billion and €806.9 billion respectively), and partly based on common borrowing, it is under severe strain and might be insufficient. To avoid the financing gap and thereby safeguard its capacity to effectively respond to internal and global challenges, the EU needs solid solutions and progress in terms of new own resources (OR), innovative financing mechanisms, an adequate fiscal framework and perhaps a complementary central fiscal capacity.

Even before the NGEU-related borrowing, there had been an ongoing debate on the reform of the EU system of OR, a key goal being to limit the share of OR based on Gross National Income (GNI) and to align the OR system better with EU policies; while new OR were already proposed back in December 2021, to date there has not been substantial progress. Making borrowing-based financing, modelled after NGEU, a permanent feature of EU funding for common strategic goods, such as energy security or defence, had been mentioned as a possible option even before the outbreak of the war in Ukraine. Now, the debate on the EU financial architecture is intensifying with the European Commission’s proposal for the revision of the 2021-2027 MFF and an adjusted package of new OR that the Commission announced in June 2023.

The debate on the EU’s financial resources and expenditure is taking place against the backdrop of a challenging economic environment. After an unexpectedly strong economic recovery from the COVID‑19 pandemic, the economic momentum came to a premature halt. Due to the war in Ukraine, energy prices increased significantly and contributed to inflation rates rising to double digits towards the end of 2022, significantly above the European Central Bank’s 2 % inflation target. This has left the EU facing a difficult balancing act – to bring down inflation while sustaining economic growth.

However, the Commission’s spring 2023 economic forecast has seen upward revisions for 2023, with growth projected to reach 1 %, and 1.7 % in 2024. At the same time, the latest inflation numbers point to a broad-based decline of price components, although from an elevated level, as all four main categories of goods and services contributed to the fall in inflation in the euro area, to 6.1 % in May 2023. Playing into both variables, growth and inflation, are unprecedented fiscal efforts to cushion the impact of past crises; as economic tailwinds fade, governments’ fiscal plans point to future consolidation efforts. In this context, on 26 April 2023 the Commission published a package of three proposals to revise the EU’s economic governance framework, shaped by the trade-off between reducing higher and more dispersed public debt levels and the need for sustained public investment.

EU policy responses (Commission and Council responses so far)

The European economy is undergoing unprecedented transformation towards a more sustainable, green and digital economy, while at the same time facing the challenges related to the war in Ukraine. Both require ambitious investments and reforms. The recovery from the COVID-19 pandemic has been supported by new EU instruments, including the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE), the Coronavirus Recovery Investment Initiative (CRII), and NGEU (see more details below).

The Green Deal Industrial Plan presented in February 2023, partly a reaction to the US’s massive funding programme to provide incentives to accelerate the transition to a clean energy economy (Inflation Reduction Act, IRA), is designed to enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality. As part of this plan, the Commission proposed the Net-Zero Industry Act and the Critical Raw Materials Act to scale up the EU’s manufacturing capacity for net-zero technologies; it also announced the European Sovereignty Fund. Following Russia’s invasion of Ukraine, there has been a more generous application of State aid rules, with the temporary crisis framework created in March 2022, and its latest modification transforming it into the temporary crisis and transition framework (TCTF).

Created in 2020, NGEU is a key initiative helping to repair the damage caused by the pandemic, and at the same making Europe more resilient and sustainable. Together with the 2021-2027 MFF, it represents 1.8 % of EU GNI and is the largest investment package ever implemented through the EU budget. The main advantage and innovation of NGEU is the way it is financed, its performance-based nature, its national ownership and its focus on the climate and digital transformation. To finance the instrument, the Member States agreed for the Commission to carry out borrowing operations on behalf of the EU.

Although resorting to the financial markets to provide Member States with financial support has happened in the past, this time it is taking place on an unprecedented scale. As a result, since the first auction in June 2021 the Commission has moved from being a small issuer, raising funds to finance relatively small lending programmes like the European Financial Stabilisation Mechanism (EFSM) and macro-financial assistance (MFA and MFA+), to being a significant and effective issuer of funds. The optimistic views of NGEU are amplified by estimates of its substantial macroeconomic impact. By 2024, it is expected to trigger at least a 1.5 % increase in the EU’s real GDP compared to a baseline scenario without NGEU investments, and to increase employment by up to 1 % during its period of operation. It provides a much-needed catalyst for public and private investment, particularly in the green transition, and modernisation of EU economies.

The centrepiece of NGEU is the RRF (10 % of NGEU’s resources are channelled through six other budgetary programmes: React-EU, the Just Transition Fund, InvestEU, Rural Development, Horizon Europe, and RescEU). Worth €723.8 billion, the RRF is a mix of grants and loans, to be invested in line with six pillars representing policy areas of European relevance, in a package of reforms and investments based on national recovery and resilience plans (NRRPs). These plans take into account many of the 2019 and 2020 country-specific recommendations of the European Semester. Thanks to the introduction of compulsory targets for spending on green transition and digital transformation under each national plan (at least 37 % and 20 % respectively) much of the RRF financing supports projects in the areas of decarbonisation, renewables, energy efficiency, resilience of key infrastructure, and sustainable transport.

Furthermore, with the new crisis caused by the war in Ukraine, and adoption of the new European initiative to reduce dependence on Russian fossil fuels, known as REPowerEU, the role and scope of action of the RRF has been extended, without changing its initial borrowing limits. The RRF and the NRRPs turned out to be agile crisis-response tools, useful for the financing and implementation of additional reforms and investments in the energy sector. Based on the agreement of 27 February 2023, Member States can amend their RRF recovery plans and include new, reinforced measures to save energy, produce clean energy, and diversify supplies. To finance these measures, Member States will be able to use up to €225 billion in loans still available under the RRF, and up to €72 billion in grants (financed by the EU emissions trading system (ETS), the Innovation Fund, and voluntary and limited transfers from the Brexit Adjustment Reserve and cohesion funds).

No later than 2028, the EU will begin to repay the liabilities incurred by the borrowing allocated to NGEU. The EU budget will repay the grants and their borrowing costs, while Member States that have resorted to loans will be in charge of their repayment. The maximum timeframe for the repayment is spread over 30 years and should finish by 2058 at the latest. Since the EU budget is financed mainly by OR based on the Member States’ GNI, value added tax (VAT) and custom duties, if there are no new OR, other options – such as an increase in national contributions to the EU budget or cuts to existing MFF programmes after 2027 – will be necessary to secure funds to repay the NGEU grants when they became due.

Bearing this in mind, the decision to create NGEU was linked to the agreement on interinstitutional cooperation on a roadmap towards the introduction of new OR. Apart from the guiding principles of the reform, the roadmap includes a timetable for the introduction of different types of resources, between January 2021 and January 2026, and is divided into three steps. However, apart from the new OR from plastic packaging, introduced in 2021 and already contributing some €6 billion per year to the EU budget, the implementation of the roadmap has not gone as planned. In 2021, after a delay, the Commission proposed the first basket of the next generation of OR, namely the revenues from emissions trading (ETS), resources generated by the carbon border adjustment mechanism (CBAM), and the recent OECD/G20 agreement on a reallocation of taxing rights over multinational corporations (‘Pillar One’). The proposal – which, if adopted, could generate up to €17.3 billion (in 2018 prices) on average annually from 2026 to 2030, and thereby help to repay the NGEU funds – has been stuck in the Council. In the meantime, the Commission has announced that it intends to propose further new OR in the third quarter of 2023.

One aspect of a broader discussion on the EU budget concerns the resources and tools needed to ensure the EU contribution to the recovery and rebuilding of Ukraine. Among various options and strategies that have been presented, the financial involvement of the EU is considered vital, not least since Ukraine (along with Moldova) has been granted EU candidate status. With a view to catering for the short- and medium-term recovery needs, in June 2023, as part of the mid-term review and revision of the 2021-2027 MFF, the Commission proposed to create the Ukraine Facility for 2024-2027. Questions about financing both the recovery and the possible accession process will certainly also be an important part of preparations for the post-2027 MFF.

Obstacles to implementation of response

The pandemic and energy crises put a heavy strain on public finances, with public debt-to-GDP levels peaking above 90 % in early 2021. While declining since then in the majority of Member States due to strong nominal GDP growth, debt levels are still markedly above pre-pandemic levels, at 84 % of GDP in the fourth quarter of 2022 for the EU overall. In the context of heightened economic and geopolitical uncertainty, on 26 April 2023 the Commission published a package of three proposals to revise the EU’s economic governance framework. The reform proposals are shaped by the trade-off between reducing higher and more dispersed public debt levels after several years of unprecedented fiscal challenges on the one hand, and the need for sustained public investments for common EU priorities on the other.

To reorganise the current fiscal governance framework, the Commission proposes to establish a new type of document: medium-term fiscal-structural plans. These plans are the cornerstone of this proposal and would encompass, besides country-specific fiscal trajectories, an incentive for investment and reform commitments through a possible extension of the fiscal adjustment path. In addition, public investment under EU programmes would not count towards the underlying deficit indicator. Whether this framework is compatible with the required increase in investment in defence, secure energy supply and a competitive green economy is currently a subject of debate.

As far as the implementation of NGEU is concerned, potential obstacles concern both financing and spending. On the financing side, the provision of support under NGEU would not be possible without successful borrowing operations conducted by the Commission on behalf of the EU. The first assessments of the implementation of the Commission’s borrowing strategy were positive and encouraged discussion on the possibilities of making it a permanent solution. However, with the escalation of the war in Ukraine, deteriorating market conditions, and the growing cost of the debt, the debate has become more focused on the risks related to the costs and repayment of NGEU funds.

While the cost of the NGEU funds programmed under the 2021-2027 MFF (€14.9 billion) was based on the assumption of an increase in interest rates from 0.55 % to 1.15 % over the period, the actual level was close to 2 % at the end of 2022 and reached 3 % in 2023. In this situation – and in the context of the process to draw up the EU budget for 2024 and of the mid-term review of the 2021-2027 MFF – the European Parliament cautions that the amounts envisaged to cover the borrowing costs could be insufficient. Given that the limited flexibility and narrow margins available under the MFF have already been used extensively for unexpected needs, the Parliament warns there is a risk that, in order to pay the interest, reductions will have to be made in EU programmes and funds.

The Parliament sees the risk as yet another argument for urgent reform of the OR system. Over the years, such reforms have proven to be difficult. The need for a unanimous decision by all Member States when negotiations happen in the spirit of juste retour, rather than that of common interest and European added value, makes the process challenging, and even more so when discussing such reform in the current context of the war and volatile economic situation. However, if the new resources are not in place in time to repay the NGEU funds, or if they do not deliver the expected and needed revenues, some policy options are either to increase Member States’ contributions based on GNI, or to limit the spending on EU funds under the next MFF. As mentioned above, despite some progress made in implementing the roadmap for the new OR agreed together with the 2021-2027 MFF and NGEU, the delays and bottlenecks are already apparent.

On the spending side, the risk is mainly related to the delays in implementing the NRRPs and the possibility of misusing or wasting resources under the RRF. Two years since the first NRRPs were submitted for assessment, the Commission reported that RRF implementation was firmly underway.

In May 2023, slightly more than 30 % of the approved grants and loans had been paid out and, on average, the RRF seemed to be operating according to the agreed timeline. However, progress has varied between Member States. In some, increasing prices and the changing political landscape and priorities have not been conducive to the smooth implementation of the agreed investments and reforms. Whereas payments have been highest in Spain (53.3 % of the approved resources), Lithuania (37.4 %), Greece (36.4 %), Croatia (35.2 %) and Italy (34.9 %), countries such as Hungary, Ireland, Poland, Sweden and the Netherlands have not received a single euro. In particular, unblocking the resources in Hungary and Poland depends on politically tough reforms related to the rule of law. In some countries, the difficulties in fulfilling certain milestones and targets have resulted in the decision to postpone requests for payments or to amend the NRRP. This is the case, for instance, for the plans of Belgium, Germany, Lithuania, Slovakia and Slovenia. Moreover, there are signals that Italy, the biggest beneficiary of the RRF, after a good start, is beginning to struggle to meet the conditions for the next payments.

Doubts are also arising over how the RRF funds are used and governed. Concerns relate to the limited budgetary scrutiny over the borrowed funds, and to the transparency of the performance-based implementation and disbursement method of the RRF, which differs from the approach used for EU budgetary instruments so far. Right at the beginning of the implementation, analysts raised the issue that speedy implementation of such large amounts should not take place at the cost of quality of reforms and investments, and of proper control of spending, also in the context of rule of law conditionality, with experts highlighting the risk of fraud and corruption. These concerns are all the greater due to the off-budget character of NGEU resources and, consequently, limited transparency and democratic scrutiny of spending. Treated as external assigned revenue, NGEU resources are not part of the usual budgetary procedures – for example, only the grant component of the funds is subject to the ex-post discharge. Moreover, the involvement of the European Parliament as the budgetary authority is restricted compared to the rest of the EU budget, and the European Court of Auditors has highlighted the existence of ‘assurance and accountability gaps’ in the systems for protecting the financial interests of the Union under the RRF.

Figure 49 – Pyramid of instruments at the disposal of the EU and its Member States

Position of the European Parliament

Whereas a substantial share of the investment will be borne by the private sector, public investment will have to increase as well. To mobilise private investment more efficiently, a functioning Banking Union and progress on the Capital Markets Union are crucial, including action on sustainable finance. On the fiscal side, in its resolution on the ‘review of the macroeconomic legislative framework’ from June 2021, the European Parliament stressed the need to strengthen the democratic legitimacy, accountability and scrutiny of the economic governance framework; thus, responsibilities should be assigned at the level where decisions are taken or implemented, with the Parliament scrutinising the European executives. Furthermore, the Parliament adopted an own-initiative report on the European Semester, calling for an urgent review of the EU fiscal framework, preferably to be completed prior to deactivating the general escape clause.

The Parliament’s role in the overall management and scrutiny of NGEU is bigger than with other intergovernmental tools created in response to various crises over the last decade, such as the European Stability Mechanism. Still, it is rather limited due to the legal basis chosen for the creation of the recovery instrument (Article 122 of the Treaty of the Functioning of the EU), the treatment of the resources borrowed as external assigned revenue (see above) and in comparison, for example, with the role it has as the EU’s budgetary and discharge authority over the EU spending on cohesion or agriculture. The Parliament sees it as a risk to central budgetary principles and calls for more transparency in the implementation process, and for relevant changes to the financial rules applicable to the general budget, in particular making external assigned revenue an integral part of the budget.

The Parliament closely monitors the implementation of the RRF, including through the regular dialogues with the representatives of the European Commission, the Standing Working Group on the RRF, and in the budgetary discharge procedure (albeit the latter is limited to the grant part of the NGEU). Among the key aspects discussed and monitored by Members of the European Parliament are the quality of the reforms and investments included in the NRRPs, risks and delays in the implementation process, assessment of the payment requests and verification of the milestones and targets that are the condition for payments. Also under discussion are equal treatment of the Member States, application of rule of law conditionality, and involvement of national parliaments and regional and local authorities in implementing the RRF.

The Parliament pays much attention to the borrowing process, its costs, and the preparations for the repayment of NGEU funds. In this context, the Parliament sees the solution to be in creating new, fair sources of revenue, which will unload the pressure on the GNI-based resource and guarantee the EU’s capability to repay NGEU-related debt without risking limitation of existing EU policies. The Parliament’s long-term commitment to the reform of the OR system was recently reiterated in the resolution of 10 May 2023, where it stresses that EU finances are going through a critical period and that a lack of reform can have highly detrimental effects on the future of the EU, its policies and objectives, and the trust of Europeans and investors in the Union.

In focus: Strategic Technologies European Platform (STEP)
In September 2022, in her State of the Union address, European Commission President Ursula von der Leyen announced the Commission’s intention of proposing an EU Sovereignty Fund. With the aim of creating a more sustainable, efficient and self-sufficient industrial policy, the fund would support projects of common interest in critical and emerging technologies across different sectors of EU industry, including microelectronics, quantum computing, artificial intelligence, biotechnology, biomanufacturing and net-zero technologies. It will be one of the key EU financial tools for the implementation of the Green Deal Industrial Plan for the Net-Zero Age.
The details of the proposal were announced in the framework of the mid-term review and revision of the 2021-2027 MFF. Instead of creating a new fund, the Commission proposes to bring together and adapt existing instruments under a common framework called the Strategic Technologies European Platform (STEP). It would include such programmes as: InvestEU, the Innovation Fund, Horizon Europe, EU4Health, Digital Europe and the European Defence Fund. In addition, the proposal envisages involvement of the RRF and cohesion funds.

Figure 50 – Timeline of new EU financing mechanisms to boost resilience

Policy gaps and pathway proposals

The successful launch of NGEU and the RRF is seen as a turning point for the EU. It has demonstrated that the European Commission’s borrowing on behalf of the EU as a way of financing the EU’s common needs is politically and legally possible, and has added a new dimension to the debate on a fiscal capacity for the euro area, reforming the European Semester, and financing the EU’s common needs, for instance those related to the green and digital transformations. Besides the supply of high-priority EU public goods, recent large-scale temporary shocks have prompted discussions about a fiscal capacity to ensure public investments. Some analysts consider transforming NGEU into a permanent facility to be a key priority for reinforcing the EU’s economic policy framework, seeing it as a way to solve financial constraints that the EU is facing and a tool to finance the provision of EU public goods.

The idea of extending NGEU to cover new objectives or even to resort to new joint borrowing gained even more momentum after Russia’s invasion of Ukraine put the EU on the path to a new crisis. Although, so far, resorting to new joint debt has been too controversial, it remains one of the options under consideration, particularly in the context of the rebuilding of Ukraine.

Some experts emphasise that a positive evaluation of the implementation of NGEU and the RRF will be crucial for a decision on using them as templates for any future instruments. Among the aspects that need improving, analysts mention anti-fraud measures, transparency, control mechanisms and broadening the accountability of RRF management. In addition, there are many voices calling for better involvement of national parliaments, the European Parliament, civil society and regional partners.

Possible action
Categories: European Union

Future Shocks 2023: De-risking Europe’s global critical supply chains

Fri, 08/18/2023 - 18:00

Written by Marcin Szczepański.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

The hardening geopolitical environment, rising protectionism and the pandemic have led to increased prominence of the debate on decoupling supply chains in order to increase their resilience. Recently, the tone of this debate has shifted to de-risking (particularly in the context of relations with China), which points towards a more nuanced way of ensuring Europe’s ambitions for increased resilience and strategic autonomy in its supply chains. It can be achieved by increasing domestic production, greater autonomy in critical raw materials (CRMs), use of trade tools and cooperation on the global stage. Such de-risking is becoming increasingly prioritised, so that the EU avoids overdependence on third countries, particularly on coercive or hostile authoritarian states. This is especially the case for green and digital technologies, which are quickly becoming the main determinant of long-term resilience and competitiveness. For example, China provides 100 % of the EU’s supply of heavy rare earth elements, which are key components of electric vehicles’ motors and wind turbines, two key technologies to deliver on the EU’s green transition. Particular vulnerabilities exist in the CRM supply chains, but they are also spread across the clean tech industry that is crucial for the EU’s future.

Figure 46 – Supply chain risks

The EU is an open economy, reliant on global supply chains to a greater extent than the US and China. At the same time these complex chains are subject to increasing disruptions and uncertainties, with many areas of fragility. This exposes the fundamental vulnerability of the EU’s industry and economy to the adverse effect of segmented and non-diversified key supply chains. As manifested during the pandemic, maintaining sustainable supplies of resources, goods and services is crucial, even when supply chains are severely disrupted by unexpected events. However, as the critical supply chains are global in nature and inherently complex, they are particularly exposed to precisely this type of unexpected and/or rapidly occurring event. Disruptions may be caused by natural and man-made disasters, geopolitical uncertainties, inter-state and inter-regional conflicts, cyber-attacks, health crises, labour shortages, new technologies, macroeconomic developments such as inflation or recession, or intentional actions such as terrorist attacks, sabotage, or blockages by activists. The bulk of risk-mitigating strategies focus on preventing severe risks that have a high likelihood of occurrence, which constitutes a weakness in itself for these approaches.

As the COVID-19 pandemic has demonstrated, there is a policy gap regarding measures that can be used to address severe risks with a low likelihood of occurrence (Figure 46). All in all, supply risks are compounded by the evolving wider circumstances, such as escalating tensions among the great powers (such as a US-China trade war), challenges to multilateralism, crisis at the WTO, slowing globalisation, the rise of protectionism, weaponisation of energy dependencies, growing demand, and the increasing use of economic tools to advance geopolitical objectives.

Position of the European Parliament

The Parliament is also a longstanding proponent of holistic, cross-policy approaches to solving complex issues of supply chain risks.

In its resolution of February 2023 on an EU strategy to boost industrial competitiveness, trade and quality jobs, the Parliament called on the Commission to assess current dependencies and find alternative sources to diversify supply chains for critical technologies and raw materials. It also highlighted the need for improved coordination and joint efforts to create resilient supply chains. The Parliament is a supporter of the idea of a European Sovereignty Fund – mobilising investments across the key sectors, including raw materials, to support the twin green and digital transition – and also encourages the Commission to help diversify supply chains.

In its resolution of November 2020 on a new industrial strategy for Europe, the Parliament stressed the need for significant investment in key value chains. To reduce over-reliance on a few markets and increase resilience, it also recommended strengthening, shortening, and diversification of supply chains (also through strategic use of public procurement) as well as increasing their sustainability. It called on the Commission to include, in its recovery plan, concrete measures to attract industries to Europe, and to increase, strengthen and promote relocation and diversification of strategically important EU industries. It also asked for a review of the antitrust rules, seeking a balance between the need to cope with global-scale competition and the protection of the supply chains.

In its resolution of November 2021 on a European strategy for CRMs, the Parliament stated that an integrated approach throughout the value chain, from waste collection and product design for recyclability to material recovery, is an essential strategy to increase their supply. It called for funding to support research and innovation and skills development. To reduce criticality and dependence, it also called for the establishment of an Important Project of Common European Interest (IPCEI) on CRMs and recommended diversifying supply sources and launching responsible and sustainable mining of CRMs in the EU. The Parliament is also a supporter of transparency and accountability in supply chains.

In its resolution of March 2021 on corporate due diligence, the Parliament advocated the prohibition of imports of products related to severe human rights violations. It wished to see rules in place allowing for effective due diligence of supply chains by the importing firms, to ensure that products that they place on the internal market are in conformity with environmental standards and human rights; due diligence helps to identify and mitigate risks along supply chains.

In its resolution of 16 September 2021 on a new EU-China strategy, MEPs highlighted that the EU is particularly dependent on China in some key supply chains and advocated mitigating this and investigating the use of forced labour in the supply chains of European companies in China.

Figure 47 – Pyramid of instruments at the disposal of the EU and its Member States EU policy responses (Commission and Council responses so far)

Increasing resilience of global critical supply chains has been carried out so far through a mix of domestic and external policy measures. The 2020 new industrial strategy for Europe focuses on the monitoring and support of key industrial ecosystems.

The particularly pressing issue of CRM supply is tackled in a multipronged way. The 2020 action plan focused on: (i) developing resilient value chains for EU industrial ecosystems; (ii) reducing dependency on primary CRMs through circular use of resources, investment in research and innovation, and more sustainable products; (iii) promoting sustainable and responsible domestic sourcing and processing of raw materials in the EU; and (iv) diversification of supply coming from third countries. The plan resulted in the establishment of a European raw materials alliance (ERMA), a dedicated industrial alliance to address the numerous challenges faced in raw materials value chains. Its mission is to close the gaps in existing supply chains, securing access to CRMs and other advanced materials and ‘breaking’ deficiencies such as the lack of technologies, capabilities and skills in the EU. Similarly, EIT RawMaterials works on securing a sustainable raw materials supply by driving innovation, education and entrepreneurship across European industrial ecosystems.

Regarding financial support, the InvestEU programme provides long-term funding to back activities of strategic importance to the EU, including those targeted at enhancing resilience and strengthening strategic value chains; examples include promoting on-shoring and developing sustainable capacities, abroad and domestically. It is expected to mobilise at least €372 billion of public and private investment. The Recovery and Resilience Facility, with its €724 billion financial envelope, also funds the implementation of reforms and investments in digital technologies and infrastructure, which will increase the EU’s global competitiveness and make it more autonomous, resilient, innovative and less dependent – by diversifying key supply chains. There is also a host of EU programmes supporting research and innovation efforts as well as infrastructure to reduce strategic dependencies, which, together with boosting cybersecurity, also have de-risking effects on key supply chains. These include Horizon Europe, the Connecting Europe Facility, Digital Europe, the European Defence Fund, the Innovation Fund and the European space programme, in addition to financing from the European Investment Bank.

Shifting to trade instruments, a May 2023 European Parliament study examines their role in increasing security of critical global value chains for key raw materials, commodities and goods. It concludes that most recent legislative acts play a role in securing existing supply chains: the FDI screening framework and the anti-coercion instrument are focused solely on this. Other instruments also have supplementary purposes: apart from securing the key supply chains, they help to develop their sustainable capacities (the Foreign Subsidies Regulation, the proposal for a Directive on Corporate Sustainability Due Diligence, CBAM), to diversify foreign sources (the International Procurement Instrument), or to safeguard the implementation of trade agreements, which also has an impact on supply chains (the Enforcement Regulation).

Regarding free trade agreements (FTAs), those already in force cover around 27 % of CRM imports, while those waiting for ratification or under negotiation may allow for more than double this coverage. The study also analysed the texts of recently signed FTAs and the proposed texts of those under negotiation, and found that the EU insists on including various measures such as an explicit chapter for trade and cooperation relating to energy and raw materials in reference to supply chain vulnerabilities and risks. On the other hand, another recent study for the ITRE Committee takes a more critical stance and sees limited scope for FTAs to influence significantly the EU’s CRM dependencies.

In terms of international agreements, the EU has deployed raw materials diplomacy to improve supply chains for over a decade. Recently, it concluded two strategic partnerships with Canada and Ukraine on raw materials. This was followed by a strategic partnership with Namibia on sustainable raw materials and renewable hydrogen, a strategic partnership with Kazakhstan on raw materials, batteries and renewable hydrogen, and a strategic partnership on renewable hydrogen and preparing the ground for a just energy transition in Egypt. An important shared goal of these agreements is the integration of value chains. In July 2022, the EU and some of its Member States released a joint statement with 13 other major economies pledging cooperation on supply chains based on transparency, diversification, security and sustainability. This was followed by the efforts to enhance strategic coordination in the G7 format to support resilient and sustainable value chains. In addition, the EU launched three digital partnerships with Japan, South Korea and Singapore that aim to reinforce crucial global supply chains. The EU has also engaged with Latin America and the Caribbean, prioritising issues of supply chains and CRMs in its new agenda for these regions. A similar strategic focus was taken in its agendas for Africa and the Southern Neighbourhood. In June 2023, the Commission proposed to start formal negotiations with the US on the Critical Minerals Agreement to foster the supply chains of CRMs needed in the production of EV batteries.

One of the strategic priorities of the EU-US Trade and Technology Council (TTC) is to improve resilience of strategic supply chains. The partners identified common vulnerabilities in supply chains for solar panels and initial cooperative steps to address them, such as promoting supply chain transparency, and joint work on project development and the design of financing tools. Both sides also identified shared risks in supply chains for rare earth magnets and announced possibilities for future collaboration in research and development in areas such as mining and recycling. Importantly, they launched an early warning mechanism to address and mitigate semiconductor supply chain disruptions through cooperation. They also committed to unprecedented levels of reciprocal transparency on semiconductor subsidies, to avoid a subsidy race. In May 2023, the EU-India TTC had its first meeting and announced the deepening of joint work on resilient value chains.

Figure 48 – Timeline of measures to de-risk Europe’s global critical supply chains Obstacles to implementation of response

Complex global supply chains take a considerable time to establish, and during this process their integration deepens. This, in effect, means that they are not very flexible and are difficult to reconfigure. However, unforeseen events may unfold quickly, leading to sudden materialisation of supply chain risks. At the same time, many of the policy responses described above will take a long time to implement: increasing domestic capacity, improving infrastructure and developing new skills for the workforce are not quick fixes. In addition, significant opposition exists to mining activities in Europe. This is in stark contrast to China, whose economic nationalism is manifested by its determination to further dominate the global supply chains for raw materials.

Furthermore, the main actors in control of many key supply chains are private enterprises that may not share the same objectives as, or may assess the risks differently to, public bodies. They are also more likely to take into consideration short-term economic parameters instead of geopolitical concerns. As supply chains are increasingly being affected and shaped by new disruptive forces, ranging from the rise of new technologies to changing geopolitical circumstances, the risk of policy not catching up with the unfolding reality is higher than ever. It could also go the other way, where realistic timeframes for reconfiguring supply chains make it impossible to deliver the prompt responses expected by political decision-makers, despite policy frameworks being in place. This is particularly risky where chains are long and complex, which makes it difficult to understand them and to map their risks correctly. Slow political decision-making can indeed be a risk in itself when confronted with rapid risk materialisation.

Since the global supply chains are facing a rising number of multiple dynamic challenges, their de-risking is based on a holistic approach implemented across various policy fields. They also vary significantly depending on their deliverables or objectives. For example, energy supply chains are fundamentally different to semiconductor supply chains. This creates its own challenges: coordinating efforts in multiple areas and subjects is complicated and difficult to oversee strategically. Setting clear monitoring frameworks is also challenging. Similarly, the funding programmes which are focused on very different areas may miss closing the funding gaps: linking financing areas such as infrastructure, digitalisation, innovation and skills in a coherent way is complex.

The very fundamental concepts behind supply chain security remain debated and point to the careful balancing act that is needed if the policy is to be effective. The trade policy review mentioned the need to understand ‘the right policy mix in terms of diversification of domestic and external sources of supply and the build-up of strategic production capacities and reserve’. Similarly, there is a longstanding debate on efficiency vs resilience of supply chains: efficiency is pivotal to compete in a fiercely contested business landscape, whereas resilience is required to shield the supply chain from unforeseen disruptions. Furthermore, the implementation of the majority of the trade legislation mentioned above depends on action by both the EU institutions and signatories (e.g. Member States). This reliance on collaborative effort poses risks to their efficiency – actions dependent only on EU activity can be less complex to launch and enforce. Many actions also contain recommendations or requests for best efforts, not just the legally enforceable provisions.

The global demand for CRMs is highly likely to skyrocket in the future, and it is uncertain whether supply will be able to keep up. This may make diversification of supply chains even more difficult, since there will be more actors interested in competing for the finite number of resources. This even concerns countries that the EU considers allies: a sign of things to come may be the recent tensions around the US Inflation Reduction Act. Further on in transatlantic relations, the TTC may fail to deliver on its ambitious cooperative agenda or even cease to exist if the US elections in 2024 bring about a change of power. There are also important nuances in the approach of both sides to China, which may diminish the TTC’s effectiveness. As the TTC progresses not through major breakthroughs but in incremental steps, it may not deliver on reducing both partners’ strategic dependencies in supply chains before business and policymakers lose interest in influencing difficult industrial adjustments through this transatlantic forum.

The global framework conditions are also becoming more and more difficult. To de-risk its key global supply chains, the EU relies on the openness of the global trade system. This is because, by bolstering and diversifying its trade, the EU strengthens its position in these chains. Diversifying import sources is also key to ensuring that the EU meets its need for crucial goods, materials and production inputs; this is easier to achieve using multilateral cooperation and coordination. However, many share the view that, with the mounting tensions in the world, multilateralism is in crisis, an oft-mentioned symptom of this being a weakened WTO. As worldwide trade and financial flows have fallen below their peaks, the globalisation process has slowed down, and different supply chain actors may have found themselves in conflicting or competing geopolitical camps. Working via fora such as the G20 and WTO to monitor and sustain supply networks has become ever more challenging, in which context the election of the next US President in 2024 will be of fundamental importance.

In focus: Strategic dependencies and critical supply chains
In May 2021, the Commission published an update to its new industrial strategy, accompanied by an analysis of the EU’s strategic dependencies. It reviewed 5 200 imported products and identified 137 products in sensitive ecosystems for which the EU is highly dependent on external suppliers. About a quarter of these (34 products) are very vulnerable, given their low potential for diversification and substitution by EU products. The EU imports about half of these products from China (52 %), followed by Vietnam (11 %) and Brazil (5 %). The report also included six in-depth reviews of supply chains in strategic areas characterised by prevalent use of these materials: active pharmaceutical ingredients (APIs); batteries; hydrogen; raw materials; semiconductors; and cloud and edge technologies. Important dependencies vis-à-vis China particularly concern APIs, CRMs and products needed for the green and digital transition. The updated industrial strategy suggests that, where common dependencies exist, ‘the EU may choose to pool resources and build stronger and more diverse alternative supply chains with our closest allies and partners’.
In February 2022, the Commission published the second edition of an in-depth analysis of Europe’s strategic dependencies. The report examined a further five areas – rare earths and magnesium, solar panels, chemicals, cybersecurity and IT software – and concluded that, for the first three areas, vulnerabilities are driven by a strong concentration of global production in China, with limited options for supply diversification, including from within the EU. The March 2023 assessment of supply chain dependencies for 15 critical technologies across five strategic sectors (renewable energy; electric mobility; industry; information and communication technologies (ICT); and aerospace and defence) determined strong vulnerabilities along all these supply chains. As many as 53 of the 70 steps examined in the chains showed vulnerability. However, as the supply chain got closer to the finished products these vulnerabilities diminished, underlining that the EU is weak in raw materials but strong in manufacturing of the final technologies. On the other hand, five technologies (batteries; solar PV; data storage and servers; smartphones, tablets and laptops; and drones) show vulnerability along the entire supply chain, thus highlighting the EU’s dependency even in the case of final products.

Policy gaps and pathway proposals

EU industry faces numerous challenges created by supply chain disruptions, which are coupled with high inflation, labour shortages, rising interest rates, and spikes in energy costs and input prices, as well as strong and sometimes unfair global competition. To address them in a strategic and structured way the Commission proposed in June 2023 the Strategic Technologies for Europe Platform (‘STEP’). The STEP will increase (by €10 billion) and leverage existing EU instruments financial envelopes to swiftly deploy financial support for investments in critical technologies. The Commission is expecting that this will lead to total additional investments of up to €110 billion. The STEP aims to direct funding towards strategic technology fields to boost their uptake and scaling up their development and manufacturing, particularly of the digital and deep tech, clean tech and biotech.

On 16 March 2023, as part of its Green Deal Industrial Plan, the Commission adopted a proposal for a regulation on CRMs. The Critical Raw Materials Act introduces the concept of strategic raw materials (SRMs), which are pivotal for strategic technologies underpinning the green and digital transitions and prone to shortages. The proposed regulation aims to establish a framework ensuring the EU’s access to a secure and sustainable supply of CRMs. To achieve this, the proposal focuses on four objectives: (i) boosting the SRM value chain; (ii) diversifying imports of SRMs (so that, by 2030, no third country would supply more than 65 % of the EU’s annual consumption of each SRM); (iii) enhancing the monitoring and mitigation of CRM supply risks; (iv) ensuring the free movement of CRMs and products containing CRMs in the single market as well as a high level of environmental protection, through better circularity and sustainability.

In March 2023 Net-Zero Industry Act has as one of its key goals improving the security of supply for net-zero technologies and fostering investment in their supply chains. The accompanying communication promotes the role of trade in de-risking supply chains by supporting trade openness and sustainable investments, and launching new initiatives with like-minded partners. The temporary state aid framework has been extended until 2025 (and transformed into a ‘temporary crisis and transition framework’) to support the actions in the Act. The proposed regulation introduced a requirement that the projects supported would need to either (i) contribute to the technological and industrial resilience of the EU’s energy system by increasing the manufacturing capacity of a component or a part of the value chain for which the EU depends heavily on imports coming from a single third country, or (ii) have a positive impact on the EU’s net-zero industry supply chain by contributing to the competitiveness of and creation of quality jobs in this supply chain.

Possible action
Categories: European Union

Future Shocks 2023: Managing antimicrobial-resistant infections

Wed, 08/16/2023 - 18:00

Written by Clément Evroux.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

The World Health Organization (WHO) describes antimicrobial resistance (AMR) as the ability of a microorganism (for instance a bacterium, a virus, a fungus, a protozoon) to survive in the presence of a medicine designed to inhibit or kill it.

According to a 2022 article by the Lancet on the global burden of bacterial antimicrobial resistance, in 2019 1.27 million deaths were attributable to AMR. The European Commission staff working document accompanying the proposal for a Council recommendation on stepping up EU actions to combat AMR estimates that a yearly death toll of 35 000 is attributable to AMR in the EU alone. Public health authorities and experts have also referred to the spread of AMR as a ‘silent pandemic‘ that might claim up to 10 million deaths by 2050. In 2019, the WHO declared AMR one of 10 global public health threats, and in 2022 the Commission identified AMR as one of three priority health threats.

The interplays between microorganisms and microbial agents are not limited to the human realm: they also include animal breeding facilities and sewage infrastructure, for instance. Furthermore, such interactions and their consequences cross borders, and AMR is a phenomenon which calls for a holistic response, based on inter-sectoral and international cooperation. Monitoring and reversing antimicrobial-resistant infections is a multi-faceted challenge entailing policy responses and coordination in several sectors such as public health, agriculture, environment and research. Therefore, such an approach has been defined and operationalised under the notion of ‘one health‘ by international, EU and national authorities. It aims to promote a set of integrated policy responses balancing and optimising the health of people, animals and ecosystems.

At EU level, while some progress has been made over the last two decades on curbing the overuse and misuse of animal and agricultural antimicrobials, a 2023 study for the Commission expects global consumption of antimicrobials from food to increase by 67 % between 2010 and 2030. From a public health perspective, in 2022 the European Centre for Disease Prevention and Control (ECDC) published an assessment of the health burden of infections with antibiotic-resistant bacteria in the EU/EEA between 2016 and 2020, showing the annual number of cases of infections rose from 685 433 in 2016 to 865 767 in 2020. Research policy is supporting the further understanding of different aspects of AMR, especially those to be studied further, such as the transfer of AMR across ecosystems and animals. It also facilitates the creation and dissemination of innovative solutions, both those that are technological (new sequencing of pathogens) and those that are not technological (new strategies for infection prevention).

Position of the European Parliament

During the current legislative term (2019-2024), the Parliament has deliberated over the different dimensions of AMR and the corresponding policy responses.

In its resolution of 17 September 2020 on a strategic approach to pharmaceuticals in the environment, the Parliament tackled the spread of AMR as one of the relevant challenges of the zero pollution action plan for water and soil, noting, in particular, the role of animal manure in the discharge of antimicrobials. The policy responses, while stressing the need for a holistic approach, identified several corresponding actions; for instance, for the pharmaceutical industry it highlighted the development of specific industry-driven principles and targets under the common antibiotic manufacturing framework, and also stressed the need to ensure the training of health professionals in the latest scientific knowledge.

In its resolution of 20 October 2021 on a farm to fork strategy for a fair, healthy and environmentally-friendly food system, the Parliament acknowledged the progress made so far across Member States to reduce the use of antimicrobials in animals, while noting the need for a further reduction. In this respect, it welcomed the Commission’s plan to reduce antimicrobial sales for farmed animals (including aquaculture) by 50 % by 2030 and noted the need to improve animal husbandry practices. More broadly, the Parliament recalled the importance of a One Health approach to curb AMR, which is a transnational and cross-border health threat requiring coordinated EU action. In particular, the Parliament called on the Commission and Member States to focus on sustainable innovative solutions, not least in prevention tools and alternative treatments. It also indicated further efforts to ensure equivalent standards for products of animal origin imported into the EU to those established under the Veterinary Medicines Regulation.

In its resolution of 24 November 2021 on a pharmaceutical strategy for Europe, the Parliament further substantiated its position regarding pharmaceuticals and AMR. It recalled the seriousness of the risks of AMR to public health, the environment and socioeconomic conditions; renewing its support for a One Health approach to fight AMR, it also outlined several policy options and targets on prevention and treatment. Regarding prevention, the Parliament supports the role of awareness campaigns to promote prudent use of therapeutics. It also recognises the value of vaccination among public health campaigns for the whole population aiming at the prevention of infections, as well as specific campaigns for patient and health professionals to encourage more targeted treatments based on patients’ actual needs; such campaigns should be coordinated at EU level through a single calendar to optimise their reach. On the development of treatments against AMR, the Parliament stressed the need to develop new diagnostics and to create a common EU therapeutic guide for antimicrobials.

According to the Parliament, research and development investment in new pharmaceuticals should aim to cover unmet medical needs, including AMR. In this regard, the Parliament invites the Innovative Medicines Initiative and the European Investment Bank in particular to play a more active role in providing funding for such research and innovation endeavours. It has also stressed the need for the Health Emergency Preparedness and Response Authority (HERA) established by the Commission to be entrusted with commensurate resources to support the development of new therapeutics for bacterial pathogens.

Figure 43 – Pyramid of instruments at the disposal of the EU and its Member States

EU policy responses (Commission and Council responses so far)

The Commission staff working document mentioned above refers to the adoption in 2001 of the first strategy on AMR by the Commission. This communication referred to relevant investments under the EU framework programme for research, and was then further substantiated by specific legislative initiatives, such as Regulation (EC) No 1831/2003 of 22 September 2003 on additives for use in animal nutrition, and the Council Recommendation of 15 November 2001 on the prudent use of antimicrobial agents in human medicine.

In 2011, the Commission adopted a communication on an action plan against the rising threats from AMR, including 12 actions on a five-year time horizon. Such actions include legislative and non-legislative initiatives, such as EU research and innovation investments, as well as coordination measures among Member States.

In 2017, following Council conclusions on developing a new and comprehensive EU action plan on AMR based on the One Health approach, and including measurable goals, the Commission adopted an action plan structured around three pillars and 15 specific objectives:

  • making the EU a best practice region, by promoting the prudent use of antimicrobials, enhancing cross-sectoral work, improving infection prevention, and consolidating surveillance of AMR and antimicrobial consumption;
  • boosting research, development and innovation, covering the full One Health spectrum, (addressing human, animal and plant health as well as the role of the environment), to generate new knowledge, improve science-based policies and support the creation and dissemination of solutions to prevent and/or treat AMR;
  • supporting international cooperation to shape a global agenda on AMR, to ensure the implementation of the WHO global action plan on AMR.

The implementation of the plan has relied on several specific EU legislative initiatives as well as EU investments. In addition, the EU response to COVID-19 in public health directly supports the objectives of the EU action plan on AMR.

Specific legislative initiatives addressing AMR

The main legislative initiatives addressing AMR have been adopted as elements of various sectoral strategies aiming to accelerate the ecological transition of the EU, such as the farm to fork strategy, the zero pollution action plan, and the strategic approach to pharmaceuticals in the environment. They include two regulations on veterinary medicinal products, which are set to reduce overall EU sales of antimicrobials by 50 % for farmed animals and in aquaculture by 2030: Regulation (EU) 2019/4 on medicated feeds, and Regulation (EU) 2019/6 on veterinary medicinal products. In 2022, the Commission adopted a proposal for a directive amending the directive on groundwater to include antimicrobial-resistant genes among the watch list of substances to be monitored by Member States.

The EU public health response to the COVID-19 pandemic has also embedded AMR among significant provisions of the relevant legislative initiatives. Regulation (EU) 2022/2371 on serious cross-border threats to health includes AMR as one of these threats, to be tackled by the appropriate preparedness and response established in the text (such as stockpiling, which is the subject of a specific assessment by HERA in 2023). Also in 2023, the adoption of the proposal for a regulation laying down Union procedures for the authorisation and supervision of medicinal products for human use reinforces the relevance of AMR. Besides the development of priority antimicrobials to tackle AMR under the objective of addressing unmet medical needs, the prudent use of antimicrobials to avoid the spread of further AMR is also included among the provisions. The parallel adoption of a proposal for a directive on the Union code related to medicinal products for human use includes relevant steps to address AMR, such as the mandatory medical prescription requirement for antimicrobials, as well as the obligation to provide information on AMR on the packaging of antimicrobials.

The EU response is also addressing the international dimension. In the 2022 Commission communication on a new EU global health strategy, AMR is enshrined as one of the 20 guiding principles of the strategy. It will aim to promote several complementary sets of actions, such as intensifying cooperation with UN agencies (FAO, UNEP, WHO, WOAH), promoting ‘deep prevention’ to mitigate the risk of outbreaks of pathogens and their transmission to humans, and promoting the development of and access to innovative medical countermeasures.

In focus: AMR in the WHO international instrument on pandemic prevention,
preparedness and response

AMR features under the ‘zero draft’ version, prepared for the consideration of the intergovernmental body that will negotiate the future WHO legally-binding agreement or other international instruments on pandemic prevention, preparedness and response.
Article 9 of the draft measure on increasing research and development capacities includes a point 4 that reads ‘each Party should encourage non-State actors to participate in and accelerate innovative research and development for addressing novel pathogens, pathogens resistant to antimicrobial agents and emerging and re-emerging diseases with pandemic potential’.
Article 18 on One Health includes a point 7 under which each Party is required to ‘develop and implement a national One Health action plan on antimicrobial resistance that strengthens antimicrobial stewardship in the human and animal sectors, optimises antimicrobial consumption, increases investment in, and promotes equitable and affordable access to, new medicines, diagnostic tools, vaccines and other interventions, strengthens infection prevention and control in health care settings and sanitation and biosecurity in livestock farms, and provides technical support to developing countries’.
Dedicated investments under the EU multiannual financial framework 2021-2027

AMR is included in the relevant EU investments on health and research in the multiannual financial framework for 2021-2027. Regulation (EU) 2021/522 establishing ‘EU4Health’, the Union programme in the field of health, recognises the prudent and efficient use of antimicrobials as a specific objective of the programme. Council Decision (EU) 2021/764 establishing the specific programme implementing Horizon Europe includes AMR in two complementary areas of intervention for transnational collaborative research and innovation activities, programmed under the cluster on ‘health’ and the cluster on ‘food, bio economy, natural resources, agriculture and environment’. For instance, in 2024, through a €100 million EU investment, Horizon Europe will support the establishment of a joint research and innovation partnership among the key AMR stakeholders in the Member States, which is expected to ensure the creation and dissemination of knowledge.

Obstacles to implementation of response

The cross-border nature of AMR, as well as the complexity of its underlying biological basis, constitute the most obvious obstacles to the effectiveness of the initiatives adopted by the EU. However, other factors of a social nature (collective and individual) also play a significant role in the capacity to curb AMR.

Research and innovation gaps

The current lack of a holistic understanding of the underlying biological basis of AMR explains a significant obstacle to curbing it. While the efforts to programme EU and Member State research investments towards One Health strategies are aiming precisely for this holistic understanding, they call not only for (at least) steady financial resources, but also for ensuring the involvement of all the relevant academic and other stakeholders in the research activities, as well as their dissemination. The study on a future proofing analysis of the 2017 AMR plan provides a set of considerations on the current obstacles in both basic and applied research. While, for instance, ‘basic research has not yet led to a precise understanding of the mechanisms by which resistance is transferred’, the translation of the knowledge created to design and place new treatments and diagnostics tools is still non-linear, and requires time especially for the development of new antimicrobials, as noted by the Commission staff working document mentioned above. Also, as mentioned by the same study, unlike for single-pathogen threats, such as COVID-19, there is unlikely to be a ‘silver bullet’ solution to AMR. For instance, in the wake of the COVID-19 pandemic the EU-funded joint action on AMR and healthcare-associated infections stressed the importance of also supporting research on infection prevention, namely through behavioural science.

Figure 44 – Projections regarding the burden of AMR by 2050 Discrepancies between national responses

Another significant obstacle relates to the differences between countries, both inside and beyond the EU. Inside the EU, the Commission staff working document highlights the fact that monitoring systems are not operational in all Member States. This corresponds to a state of play where Member States’ national action plans vary in scope, and targets. For instance, the 2022 overview report on Member States’ One Health national action plans against AMR found that, by September 2021, four Member States still had a national action plan on AMR without proper inclusion of ‘one health’ (covering at least human health, animal health and, to some extent, food production and food safety). Environment has only been included in 13 national plans, and only one of them included plant health.

In addition to the differences between Member States’ policy responses, another specific difficulty is constituted by the geographical discrepancies in AMR between Member States, which leads to a imbalance of burdens. The ECDC report on AMR surveillance in Europe between 2020 and 2022 mentions that ‘a north-to-south and west-to-east gradient was generally observed, with higher AMR percentages in the southern and eastern parts of Europe’. Beyond the EU, since 2015 the WHO has launched the global antimicrobial resistance and use surveillance system to facilitate surveillance around the globe and the creation of knowledge through cooperation.

Education gaps across societies

Education is another significant challenge to fighting AMR. In February and March 2022, Special Eurobarometer 522 focused on AMR, with over 26 500 people interviewed across the Member States. In general, the understanding of the basic functioning of antimicrobial agents is still limited, with only 50 % of the interviewees giving the right answer to the closed question on whether antibiotics kill viruses; a majority of interviewees answered correctly in 15 Member States. Beyond human health, knowledge of the EU legislative measures are not satisfactory across Europe; in only six Member States were the majority of interviewees aware that using antibiotics to stimulate growth is banned within the EU.

Policy gaps and pathway proposals

The AMR policy response can count on the expertise and interest of a wide range of stakeholders.

Scientific communities have structured a transnational platform to design common activities and to facilitate the translation of research into evidence-based policymaking. For instance, the joint programming initiative on AMR (‘JPI AMR’) gathers national scientific experts from 28 participating states, including 15 EU Member States. In 2021, it adopted a strategic research and innovation agenda to align relevant national programmes (as well as the EU research and innovation framework programmes) around six main targets: therapeutics, diagnostics, surveillance, transmission, environment and interventions. Each target is also substantiated by further scientific and communication activities. For instance, specific discussions on vaccination indicate the relevance of vaccines as a useful therapeutic solution: vaccination can either target common infections for which antibiotics are commonly used, or pathogens that often develop resistance to drugs. In addition, it is reported that vaccination programmes are also effective in promoting the prudent use of antibiotics. In a 2022 scientific publication, ‘Nordic vets against AMR‘, a group of academics and scientific practitioners stress the need to provide for mandatory training on the AMR regulatory and policy framework for all veterinary students across the EU.

Healthcare staff are also involved in the public debate across the EU and across various professional activities and roles. In a 2023 article on closing the gaps in tackling AMR, Hospital Healthcare Europe considers that tackling AMR is necessary to achieve the European Health Union and that it requires, in particular, the ability to commit resources (financial, skills) over the long term. It also considers that such an approach might be beneficial for healthcare policies by improving their proactive dimension, offering a balance with the short timeframe associated with the reactive dimension of such policies. Other health professionals convey complementary messages to support their commitment to AMR policy design and implementation. For instance, in 2020 the European Federation of Nurses Associations published a message on the European antibiotic awareness day, to highlight the key role of nurses in infection prevention both in care premises and, beyond them, across local communities.

Patient organisations also contribute actively to informing the public debate on AMR. For instance, in 2022, the European Patients Forum issued a statement which fed into the Commission’s proposal for a Council recommendation on AMR. While noting in general that tackling AMR is especially key for patients with chronic conditions, it calls for strengthening patients’ awareness of their health conditions, not least by ensuring substantial investments for faster and more accurate diagnostics. It also stresses the need to reinforce patients’ literacy, through complementary approaches such as patient-centred practices by antimicrobial prescribers, or by leveraging the information dissemination capacities of patient organisations. Patients and medical communities active in rare diseases have also pointed to the specific extra risks of AMR for patients with such health conditions.

Several sectors in industry are also committed to contributing to the discussion on AMR, including the European Federation of Pharmaceutical Industries and Associations (EFPIA). At the beginning of the current European Parliament’s legislative term, EFPIA addressed, together with 16 other civil society organisations and industry stakeholders, a letter to the Members of the Parliament. The letter presented AMR as a complex and major health threat, inviting the Members to include it as a priority topic across their interinstitutional activities. In a 2021 recommendation paper, EFPIA pointed to the low number of antimicrobials available on the market, and the need to provide financial and regulatory incentives for the development of new ones. The creation of a legal scheme extending the intellectual property protection of such new AMR therapeutics is one of the main proposals brought forward. In addition, agrifood professionals also inform the debate. In a 2022 statement at an event organised by two Members of the Parliament, the chair of the European platform for the responsible use of medicines in animals mentioned that it is necessary to use antibiotics as little as possible, but as much as necessary.

Figure 45 – Timeline of measures to tackle antimicrobial infections Possible action
Categories: European Union

Future Shocks 2023: Safeguarding our natural capital

Mon, 08/14/2023 - 18:00

Written by Jurgita Lekaviciute and Liselotte Jensen.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

Excessive emitting of greenhouse gases from human economic activity into the atmosphere is causing global warming, with Europe warming faster than any other continent, according to the World Meteorological Organization (WMO). Among the impacts of global warming, one that is very concerning is the change in weather patterns, with more frequent and intense extreme weather events. Such events include droughts, where reduced rainfall can cause water scarcity and negatively impact the quality or accessibility of water resources. In 2021, the EEA estimated that 20 % of Europe’s territory and 30 % of its population experience water stress on an annual basis. As discussed in the risk chapter on droughts and water scarcity, this can have a serious impact on economic sectors as well as on biodiversity.

Biodiversity is declining faster than at any time in human history in every region of the planet. Around one in eight global animal and plant species are threatened with extinction. In the latest assessment of the state of nature in the EU, an estimated 81 % of EU habitats and 63 % of species have poor or bad conservation status. Still, 36 % continue to deteriorate at the EU scale and only 9 % of these habitats show improving trends. As noted in the risk chapter on biodiversity loss or collapse, biodiversity loss is much more than the extinction of species. Biodiversity provides us with ecosystem services essential for life: the food we eat, the air we breathe, and the medicines we use.

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A key European instrument to tackle water stress and ensure sustainable use is the Water Framework Directive (WFD) (2000/60/EC). Unfortunately, implementation is lacking, with more than half of European water bodies, in 2019, under exemption from staying on track for the WFD targets – which should be reached in 2027.

According to the UN Convention on Biological Diversity (CBD), the main international instrument on biodiversity protection, none of the 20 Aichi biodiversity targets adopted by the international community for the last decade were fully met. In the 15th and most recent meeting of the conference of parties under the CBD (COP15) in December 2022, the 196 parties agreed on a new (non-binding) global biodiversity framework, which consists of 23 targets, including some to restore 30 % of degraded ecosystems and to protect 30 % of land and sea areas by 2030.

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decline caused by habitat loss by 2050, but only if actions are implemented urgently and in an integrated way. Increased conservation efforts are critical but not sufficient; there is a need for strong action on conservation and on the direct and indirect drivers of biodiversity loss. The literature also suggests that if we fail to limit global warming to 1.5°C or even 2°C, the continued impact of extreme weather events and changes in temperature and precipitation will become the dominant cause of biodiversity loss.

Position of the European Parliament

The European Parliament declared a climate and environment emergency in 2019, stating that ‘immediate and ambitious action is crucial to limiting global warming to 1.5°C and avoiding massive biodiversity loss’. This was reiterated in its January 2020 resolution on the European Green Deal, where Parliament argued that a safe, clean, healthy and sustainable environment and a stable climate should be a fundamental right for all people living in Europe. Parliament highlighted that agriculture, fishery and food production remain the biggest driver of terrestrial and marine biodiversity loss, calling for full alignment of the CAP with the European Green Deal ambitions and for the Commission to ensure this in its assessments of Member States’ strategic plans and eco-schemes. Parliament further noted the promise of nature-based solutions to help towards both climate and biodiversity targets, and called for the EU to push for a binding global agreement to halt and reverse biodiversity loss. In its resolution adopted the following day, specifically regarding COP15, it reiterated this need for binding targets at both EU and global level, and for an ambitious EU biodiversity strategy to protect natural areas and restore degraded ecosystems by 2030.

In its resolution of 17 December 2020 on the implementation of EU water legislation, Parliament stressed the need to update the list of priority substances (Annex X of the WFD) and insisted that pollutants of emerging concern and mixed toxicity should be addressed within the framework of the WFD and its ‘daughter’ directives. It called on the Commission to strengthen monitoring of potential pollutants and their risk profiles and to take decisive action when Member States fail to meet environmental quality standards set in EU legislation for priority substances.

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In June 2021, Parliament welcomed the EU biodiversity strategy for 2030 and its level of ambition, while making nearly 200 recommendations to strengthen it. Parliament asked the Commission and Member States to increase their efforts towards reaching the goals laid down in the strategy. It also called on the Commission to submit, in 2022, a proposal for a legally binding governance framework – a ‘biodiversity law’, as a counterpart to the EU climate law – to steer a path to 2050. In the subsequent 2021 resolution on the farm to fork strategy, Parliament called for a pollinator indicator and a restoration target, reiterating the need to reduce harmful pesticides use.

In response to the droughts of 2022, potentially the worst for at least 500 years, which left 64 % of the continent under a drought warning (with 17 % on drought alert) according to the European Drought Observatory, Parliament adopted a resolution on the consequences of drought, fire and other extreme weather phenomena. This linked pressures on water ecosystems and broader biodiversity concerns with the general health of EU citizens and with impacts on and from the agricultural sector, in particular, and other high water demand sectors, highlighting the risk exposures, along with measures to adapt and increase resilience. Parliament pointed to the potential of specific types of nature-based solutions to increase overall resilience of ecosystems, and noted the human right to drinking water and the need to recognise violations.

The resilience of the agricultural sector, as a key sector in terms of both its impact on and dependence on ecosystem services, has required particular attention. During the June 2023 plenary, Parliament adopted an own-initiative resolution on ‘Ensuring food security and the long-term resilience of EU agriculture’. It specifically addresses the need for new cultivation methods to increase crops’ resilience to climate change and protect agricultural yields in view of the droughts and water shortages faced by more and more EU Member States. While Parliament stressed the importance of restoration and conservation of biodiversity, soil health, and the use of agro-ecological and organic methods in relation to crop resilience and yield, it also called for further research and dissemination efforts towards farmers regarding new breeding techniques, including new genomic techniques. Some of these aspects are included in the 6 July 2023 package on food and biodiversity.

While Parliament has called for a reduction in the use of harmful pesticides, the food security resolution above reiterated the need for integrated pest management measures and research into alternatives to synthetic fertilisers and pesticides. It criticised the Commission’s proposal to limit, and in some areas ban, pesticides without offering alternatives to protect farmers’ livelihoods and safeguarding EU food security.

EU policy responses (Commission and Council responses so far)

Climate change affects human activity and our natural capital. The European Green Deal of December 2019 proposes many measures for combating climate change, with the 2021 EU climate law making action to cut greenhouse gas emissions legally binding and the ‘Fit for 55’ package strengthening the main instruments to do so. Likewise, the EU has a dedicated line of action for safeguarding our natural capital.

The EU framework for nature protection is based on two main nature directives: the Birds Directive and the Habitats Directive. They seek to ensure the conservation of species and habitat types of EU importance by establishing an extensive network of special protected areas called the Natura2000 network. In 2020, the EU adopted the biodiversity strategy for 2030, aligned with the ambitions and commitment set out in the European Green Deal. It is dedicated to protecting and restoring nature and to reducing direct pressures such as pollution and invasive species, and seeks to enable transformational change to address underlying drivers of biodiversity loss, with ambitions reaching the global level. It also proposes to set legally binding nature restoration targets, which formed the flagship proposal for a nature restoration law in 2022.

The WFD is the main legal tool for protecting Europe’s water bodies, together with its two daughter directives: the Environmental Quality Standards Directive and the Groundwater Directive. Among other things, the legislation lists priority substances posing risks to water quality and requiring monitoring and concentration limits. Currently, 53 substances are covered in legislation for surface water (mainly pesticides, industrial chemicals and metals). The fitness check of EU water legislation identified shortcomings regarding chemical pollution, and a revision of the list of pollutants and the corresponding regulatory standards are underway. The proposed text would add 23 individual substances to the list of priority substances for surface waters, including pesticides such as glyphosate, some pharmaceuticals (painkillers, anti-inflammatory drugs, antibiotics), Bisphenol A, and a group of 24 Per- and polyfluoroalkyl substances (PFAS). The proposal would also introduce an obligation, in exceptional circumstances of natural origin or force majeure (extreme floods, prolonged droughts, or significant pollution incidents), for competent authorities of all possibly affected water bodies to alert each other and cooperate to minimise damage and address consequences. Another important tool with regard to water management, the Urban Wastewater Treatment Directive, is also currently under review.

The 2021 zero pollution action plan outlines several measures with relevance to biodiversity and water stress, which are also prevalent in the 2020 farm to fork strategy. These include, for example, the halving by 2030 of nutrient losses and the use and risk of chemical pesticides, including the use of the more hazardous ones, subsequently proposed as part of the 2022 proposal for a regulation concerning the sustainable use of plant protection products, replacing the existing Directive on Sustainable Use of Pesticides. As a result of reduced nutrient losses, fertiliser use is expected to decrease by a further 20 %. The EU biodiversity strategy for 2030, the farm to fork strategy and the zero pollution action plan are expected to substantially reinforce actions to protect pollinators.

Targets for nature-friendly agriculture under Pillar 2 of the biodiversity strategy go beyond reducing chemical pesticides and fertilisers and include expanding organic farming and high-diversity landscape features that enhance carbon sequestration and increase agro-forestry and urban greening. Most of these targets are also part of the farm to fork strategy, which aims to make EU food systems more sustainable. The combined measures targeting sustainable food production and land use make the EU common agricultural policy (CAP) an essential tool to help in the transition of agricultural practices. The new EU forest strategy for 2030 and the 2023 regulation on deforestation-free products are also key steps to protect and preserve biodiversity in Europe and beyond.

In many of the strategies highlighted above, as well as in the EU strategy on adaptation to climate change and the EU climate law, nature- or ecosystem-based solutions are noted as key win-win options to adapt to a changing climate, enhance biodiversity and increase resilience of ecosystems and sectors simultaneously. According to Eggermont et al (2015), nature-based solutions (NBS) refer to the sustainable management and use of nature to tackle societal challenges. There are different NBS for different sectors, such as green buildings, public and urban spaces, water management, sustainable forestry, sustainable agriculture, sustainable tourism, and others. One NBS area of relevance here are solutions for water management that involve the use of ecosystem services to improve water quantity and quality, and to increase resilience to climate change. These include natural solutions for the management of flood and surface water in rural, peri-urban, and urban contexts, wastewater management and treatment, and resource recovery.

Figure 41 – Pyramid of instruments at the disposal of the EU and its Member States

Figure 41 shows some of the core tools of relevance to water stress or biodiversity concerns; not all are directly touched upon in the text, but all play or could play a significant part in safeguarding Europe’s natural capital. Implementation of EU legislation happens at local, regional and national level, while joint action and cooperation can support innovation and sharing of best practices. Similar tools to the natural capital fund used to exist through the EIB’s natural capital financing facility, which was merged into InvestEU, though the section on obstacles below suggests targeted financing is needed. The TEN-W box under EU primary action links back to the idea in the risk chapter on droughts and water scarcity to establish a trans-European network (TEN) for water – using an ecosystem approach to apply foresight and planning – to safeguard people, biodiversity and businesses relying on water as a resource. TENs already exist in the areas of transport, energy and telecommunications, with a focus on delivering a functioning single market. A TEN-W could help prioritise and secure water resources for water transport, energy production, farming or human consumption while respecting the carrying capacity of ecosystems at a transnational level, as water in Europe crosses many borders.

Obstacles to implementation of response

In the United Nations Environment Programme (UNEP) synthesis report entitled ‘Making Peace With Nature: A scientific blueprint to tackle the climate, biodiversity and pollution emergencies’ (2021), human-induced environmental degradation is identified as one of the factors impeding the end of poverty and hunger, the reduction of inequalities and the achievement of sustainable economic growth. The report highlights that natural capital needs to be included in decision-making and that environmentally harmful subsidies need to be stopped.

One of the main obstacles to adequately integrating biodiversity and natural capital concerns comes from biodiversity and nature not having a clear economic value. Nature’s value and the benefits it provides are, as a result, not considered in economic activities, but every sector or company depends on nature to a certain degree. While exploring the links between economic activities and natural ecosystems, it was found that 55 % of global gross domestic product (GDP) is moderately or highly dependent on nature. In five industries (agriculture; forestry; fishery and aquaculture; food, beverages and tobacco; and construction), 100 % of the economic value generated by direct operations (and a minimum of 60 % generated in the supply chains) exhibits high dependence on nature (these five industries represent 12 % of global GDP, amounting to US$13 trillion).

According to a top European Central Bank (ECB) executive, an ECB study evaluating data on 4.2 million companies concluded that 72 % of Eurozone companies and three-quarters of bank loans in the region are exposed to loss of biodiversity; the study assessed how many rely on at least one ‘nature-related service’ such as pollination, clean water, healthy soil, timber, or sand. The executive warns that destroying nature will ‘destroy the economy’.

A better understanding of the economic value of biodiversity and of the financing of biodiversity is therefore an important issue that will need attention in the future. A 2022 Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) report on valuing nature warns that, though we need to value nature more in decision-making at all levels, putting a price on nature remains a complex challenge due to natural ecosystems’ interconnectedness and intrinsic values, often depending on context and culture and rarely substitutable.

A recurring obstacle concerns the overall implementation of adopted legislation, such as the WFD, and of achieving biodiversity targets set out in the EU biodiversity strategy for 2030 and agreed at COP15. It is also important to strengthen international cooperation, as well as the alignment of local, national and international efforts towards sustainability, and this is best done leading by example.

In October 2020, the Council conclusions on the EU biodiversity strategy reaffirmed that more ambition on nature restoration is needed, including measures to protect and restore biodiversity beyond protected areas. The conclusions also recognised the important link between climate change and biodiversity loss, as well as their respective solutions. In the conclusions for COP15, the Council called for the adoption of an ambitious, comprehensive and transformative post-2020 global biodiversity framework that includes long-term 2050 goals, 2030 intermediate outcomes and action-oriented 2030 targets that effectively and simultaneously address the direct and indirect drivers of biodiversity loss. When Parliament welcomed the biodiversity strategy, it endorsed, by 515 votes to 90, with 86 abstentions, the main targets of the Commission’s proposal. Parliament also supported the idea of restoring at least 30 % of the EU’s land and sea and requested a binding governance framework towards 2050 with 2030 targets – comparable to the EU climate law.

The proposed nature restoration law is argued, by many, to be an essential step, yet policymakers across the Council and Parliament have questioned the best approach to safeguarding our natural capital, citing concerns for farmers and food security in particular (see box below); trilogues between the institutions started in July 2023. Scientists, NGOs and various organisations, including joint statements from ‘EU Farmers for Nature Restoration‘ and the industry-linked Forum for the Future of Agriculture, reconfirmed their full support for the proposed legislation, stating that ‘the science is clear that nature restoration will increase our resilience to extreme weather events and support long-term food security’.

In focus: The fate of the proposed EU nature restoration law
The June 2022 proposal for a nature restoration law is the core element of the EU biodiversity strategy for 2030. It sets multiple binding restoration targets and obligations across a broad range of ecosystems, complementing existing legislation. These nature restoration measures should cover at least 20 % of the EU’s land and sea areas by 2030, and all ecosystems in need of restoration by 2050. The proposed nature restoration law also has a specific objective to reverse the decline of pollinator populations by 2030.
In May 2023, the EU nature restoration law was voted in the opinion-giving committees, where the European Parliament’s Committee on Agriculture and Rural Development and Committee on Fisheries, both associated to the Committee on the Environment, Public Health and Food Safety (ENVI) file on EU nature restoration law, voted to reject the proposal. In a speech to the ENVI committee, European Commission Vice-President Frans Timmermans said there would not be another proposal, stating that ‘[the] nature restoration law is a climate law of biodiversity and therefore a pillar of the Green Deal’ and that ‘there is no such thing as supporting the outcome of COP15 but refusing to implement it at home’. His final statement concluded that we cannot ‘maintain the Green Deal without the nature pillar, because without the nature pillar, the climate pillar is also not viable’.
The ENVI committee voted on amendments to the proposed text on 15 and 27 June 2023. The final vote was tied (44 votes in favour, 44 against, with no abstention), meaning that, even if it was not rejected, there was no clear majority in the ENVI committee to support the proposal as amended. ENVI was therefore bound to table a proposal to reject the Commission’s text.
The Council adopted its general approach on the file on 20 June 2023, supporting an ambition for restoration measures to cover jointly at least 20 % of the EU’s land and 20 % of sea areas by 2030. However, it introduced various flexibilities in the ecosystem-specific obligations, a step-by-step approach for the delivery of national restoration plans, provisions on financing, and some derogations.
During the plenary on 12 July, the proposal to reject the Commission’s proposal did not pass (312 votes in favour to 324 against, with 12 abstentions). In a tight vote, Parliament finally adopted its position in favour of the nature restoration law (by 336 votes to 300, with 13 abstentions). A proposed amendment to increase to 30 % the overall 2030 restoration target, with reference to the COP15 agreement, was not adopted, with the target of 20 % from the Commission proposal being agreed to. Yet, other amendments resulted in a weaker position from the Parliament than that of the original proposal or even the Council’s general approach. Examples of such amendments include the deletion of the proposed article concerning restoration of agricultural ecosystems and sub-targets regarding rewetting of drained peatlands. The Council reduced the proposed mandatory indicators for forest ecosystems from six to three, while Parliament left only one of them (Article 10). Article 4 revisions deleted the time-bound targets (2030, 2040 and 2050, with linked percentages) and non-deterioration obligations, and (in 4.1) limited land, coastal and freshwater restoration measures to within Natura2000 areas only. The new Article 22a would allow targets to be postponed due to socioeconomic concerns and Article 23 would require an impact assessment on food security before the law would apply.
Following the plenary vote, several environmental NGOs released a joint statement noting that the fact the proposal was not rejected was a victory, but criticising the resulting ‘shell of a law’ due to the low level of ambition.

As regards the uptake of NBS, a key obstacle frequently noted by city authorities and private developers concerns knowledge gaps about the types of NBS available on the market, as well as a perceived lack of evidence of the effectiveness of such solutions; this in turn results in a lack of experience when it comes to public and private procurement of NBS. The 2022 independent expert report on ‘nature-based solutions in a nature positive economy’ outlines these obstacles as well as the evidence supporting the effectiveness of NBS for specific sectors.

For agriculture in particular, NBS are highlighted as a transition pathway towards sustainable agriculture, where agricultural activities become part of the natural system using methods which conserve and restore soils and ecosystems over those that degrade the environment on which it depends. NBS in the agricultural sector can comprise agricultural landscapes or agricultural production. For agricultural landscapes, the focus is on multifunctional landscapes and waterscapes, improving conditions for biodiversity, increasing resilience to extreme events, and enhancing ecosystem services. For agricultural production, there is a focus on optimisation through nutrient management and retention, and resilience through mixed production such as in agro-forestry.

In general, the report states that working with NBS increases resilience to extreme weather events, improves yields over time and has lower costs. For other sectors, such as tourism, applying NBS can help conserve tourism activities and attractions by lowering the impacts from visitors on the natural world and engaging tourists in conservation. For the water management sector, its relevance was touched upon in the section above on EU policy responses – although it is important to reiterate that water management is not only essential to secure drinking water and irrigation for human society, but that it also includes returning nutrients to the soil and ensuring resilience of wetlands and river systems providing both economic and biodiversity benefits.

Obstacles to the implementation of NBS and evidence of their benefits therefore point to a need for greater attention to be paid to integrating biodiversity across different sectors and policies, to deliver co-benefits.

As Figure 42 highlights, the next decade has significant milestones and opportunities for pushing higher ambitions or, at the very least, reflection at all levels on the adequacy of EU actions. The obstacles already experienced in implementing the WFD and agreeing on the nature restoration proposal put in question the commitments to address the environment and climate crisis, where the global stocktake is likely to demand increased efforts by developed countries.

Figure 42 – Timeline of key milestones in action to safeguard natural capital Policy gaps and pathway proposals

On the global level, at the recent COP15 meeting of the UN CBD, it was agreed that investors and businesses need to integrate nature and biodiversity issues into their strategic planning and reporting, alongside climate change. It was agreed to mobilise, by 2030, at least US$200 billion per year across all sources and raise international biodiversity financing from developed to developing countries to at least US$20 billion per year by 2025, and to at least US$30 billion per year by 2030. In the EU, the biodiversity strategy for 2030 envisages the need to unlock at least €20 billion a year for spending on nature, and further expects a significant part of the EU budget dedicated to climate action to go towards biodiversity and NBS. The European Parliament secured the introduction of an annual biodiversity spending target of 7.5 % from 2024, with the aim of reaching 10 % in 2026 and 2027.

Possible action
Categories: European Union

Future Shocks 2023: Securing energy supply in Europe

Thu, 08/10/2023 - 18:00

Written by Agnieszka Widuto.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

The security of energy supply has come to the top of EU agenda, following Russia’s aggression against Ukraine and the ensuing energy crisis. The EU has a relatively high dependency on energy imports (57.5 % in 2020) and all EU Member States are net energy importers. In 2021, Russia was the EU’s largest energy supplier, accounting for 45 % of its coal, 36 % of its gas and 25 % of its oil imports. Over the course of 2022, the situation changed dramatically, with several rounds of sanctions on Russian energy products, EU policy initiatives to wean itself off Russian energy (such as REPowerEU) and the limits on gas transmission imposed by Russia. The latest available data show that, in the fourth quarter of 2022, the EU imported no coal, and only 18 % of its gas and 15 % of its oil, from Russia.

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However, despite these reductions in Russian energy imports, energy security remains a long-term challenge for the EU given its overall high energy dependency. Diversifying imports away from Russia and towards other third-country suppliers can bring new risks relating to geopolitical considerations, competition in the global economy and developing dependencies on undemocratic regimes. Energy security is also inextricably linked to energy affordability, which the energy crisis made blatantly clear. Energy prices have risen in light of supply problems and were the main driver of overall inflation that impacted the budgets of households and companies. Furthermore, as fossil fuels remain the main contributor to greenhouse gas emissions (GHG), energy security is intertwined with climate policies. This may sometimes lead to short-term trade-offs (as seen in temporarily increased production of coal in 2022) but also to opportunities, as the energy crisis is at the same time accelerating long-term investments (such as the roll-out of renewables) and thus increasing domestic energy production, thereby also contributing to energy security.

The impact of the conflict on the EU energy situation was the most severe in terms of gas. In 2022, the EU managed to cope without supply disruptions and avoid gas shortages during the winter period. Nevertheless, a recent International Energy Agency (IEA) report warns of potential gas shortages in the winter of 2023 in case of a further drop in Russian supplies, LNG demand rebound in China and prolonged cold weather conditions in Europe. The EU is thus faced with a challenge to intensify its efforts, as it moves from short-term crisis management to tackling the challenge of ensuring long-term energy security and strengthening its strategic autonomy in the energy field.

Position of the European Parliament

The March 2022 resolution on Russia’s aggression against Ukraine calls for reducing the EU’s energy dependence, in particular on Russian gas, oil and coal, by diversifying energy sources, expanding LNG terminals and supply routes, unbundling gas storage, increasing energy efficiency and speeding up the clean energy transition.

In a resolution of April 2022 on the ‘Conclusions of the European Council meeting of 24-25 March 2022: including the latest developments in the war against Ukraine and the EU sanctions against Russia and their implementation’, the European Parliament called for the establishment of common strategic energy reserves and energy purchasing mechanisms at EU level to increase energy security and reduce external energy dependency and price volatility. It also called for a full embargo on Russian energy imports.

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In its May 2022 resolution on ‘The social and economic consequences for the EU of the Russian war in Ukraine – reinforcing the EU’s capacity to act’, Parliament stressed the importance of ensuring energy sovereignty and independence from Russian supplies and more strategic autonomy and energy security, by upgrading and ensuring major investment in the EU’s energy infrastructure, including interconnections and cross-border infrastructure for renewable energy production, and energy efficiency.

In its resolution of October 2022 on ‘The EU’s response to the increase in energy prices in Europe’, Parliament highlighted the role of investments in renewable energy, energy efficiency and the necessary infrastructure – including targeted, well-defined cross-border projects with investments through NextGenerationEU and REPowerEU – in helping the EU achieve energy sovereignty, open strategic autonomy and energy security.

Figure 39 – Pyramid of instruments at the disposal of the EU and its Member States EU policy responses (Commission and Council responses so far)

Over the course of 2022 and 2023, the EU undertook a number of actions to reduce its dependency on Russian energy, for instance by diversifying its energy supplies, filling up gas storage facilities, promoting joint gas purchases, reducing energy demand and promoting energy savings, increasing energy efficiency and boosting the deployment of renewables. Many of these measures also help boost overall energy security in the long term by reducing Europe’s dependency on fossil fuel imports from third countries.

In May 2022, the European Commission put forward the REPowerEU plan to reduce energy imports from Russia and accelerate the green transition. The plan included two legislative proposals: one on REPowerEU chapters in the Recovery and Resilience Plans (Regulation (EU) 2023/435, adopted in February 2023) and a proposal amending three energy directives to boost renewable energy use and increase energy efficiency (procedure ongoing). The REPowerEU plan also included several strategies, e.g. to boost energy savings and diversify energy imports.

Renewable energy accounted for 21.8 % of EU energy consumption in 2021; a revision of the Renewable Energy Directive (RED) under the European Commission’s Fit for 55 package (July 2021) aimed to raise the EU’s 2030 target from 32.5 % to 40 % by 2030. The REPowerEU plan proposed to raise this target further to 45 %. In a March 2023 compromise agreement between the Parliament and the Council, this target was set at 42.5 %, with the possibility of an additional indicative top-up of 2.5 %. Additional sub-targets have been adopted for transport, industry, buildings, heating and cooling. The REPowerEU plan also proposed amendments to the Energy Performance of Buildings Directive, introducing an obligation to provide solar energy installations on buildings. Moreover, the REPowerEU plan included a solar energy strategy with a target of over 320 GW (gigawatts) of newly installed solar photovoltaic capacity by 2025, and almost 600 GW by 2030. These initiatives were followed by Council Regulation (EU) 2022/2577, adopted in December 2022 and laying down a framework to accelerate deployment of renewable energy. This regulation aimed to simplify permitting procedures for renewable energy projects, in particular solar installations, heat pumps, and projects involving the repowering of renewable energy plants.

The EU also took measures to curb energy consumption in the short, medium and long term. The REPowerEU legislative proposal included amendments to the Energy Efficiency Directive that increased the 2030 target for energy efficiency to 13 % (compared with a 2020 reference scenario). This came on top of the revision already proposed in the context of the European Green Deal and the Fit for 55 package, which aimed to increase the target by 9 %. A compromise agreement reached by the co-legislators in March 2023 set the EU energy efficiency target of 11.7 % for 2030. Another initiative under REPowerEU was the EU ‘Save Energy‘ plan, which proposed a number of energy-saving measures. Council Regulation (EU) 2022/1369 of August 2022 on coordinated demand reduction measures for gas set a voluntary 15 % target for reducing Member States’ gas consumption between 1 August 2022 and 31 March 2023 (the target would become mandatory in emergencies); the regulation was prolonged until 31 March 2024. Council Regulation (EU) 2022/1854 of October 2022 on an emergency intervention to address high energy prices committed Member States to a binding 5 % reduction in peak electricity consumption, and a voluntary 10 % reduction in overall electricity consumption between 1 December 2022 and 31 March 2023. Additional aspects of this regulation included measures aiming to compensate consumers for high energy prices through a cap on excess revenues of some electricity generators and a solidarity contribution from fossil fuel producers, as well as allowing Member States to regulate electricity prices in some cases. Separately, Regulation (EU) 2022/2578 establishing a market correction mechanism to protect citizens and the economy against excessively high prices set a temporary gas price cap at €180/MWh, aiming to limit extreme gas price spikes. This mechanism is valid for a year from 1 February 2023 and can be suspended if it jeopardises the security of gas supply, intra-EU gas flows, financial stability and demand reduction efforts.

Another important response to the energy security challenge was a diversification of energy supplies. The EU external energy engagement strategy, presented as part of REPowerEU, proposed measures to build long-term energy partnerships around the globe. The largest increases in energy imports from outside the EU have come from Colombia and South Africa for coal, the United States for LNG, and Saudi Arabia and the US for oil. In addition to stronger energy trading relations with the US, the EU also scaled up its gas imports from Norway, Qatar, Algeria and Azerbaijan. Moreover, it has developed and/or accelerated the development of energy infrastructure, for instance new LNG terminals (e.g. Wilhelmshaven in Germany), the Baltic Pipe gas pipeline and the Gas Interconnector Greece-Bulgaria. The EU has also strengthened its energy relations with Ukraine, for instance through initiatives such as the Generators of Hope and increased electricity trading through the synchronisation of the EU and Ukrainian power systems.

In terms of boosting gas storage in response to limited supply, Regulation (EU) 2022/1032 of June 2022 on gas storage set a binding target of 80 % of EU storage capacity to be filled in by 1 November 2022, with a 90 % target set for subsequent years. The regulation was swiftly implemented and storage facilities reached a filling rate of 80 % as early as September and of 90 % as early as October 2022. The EU exited the winter season with record high storage levels of 57 % at the end of April 2023, while the current filling rate (May 2023) stands at 68 %, according to the latest data. Therefore, the EU appears well on track to achieve the 90 % filling rate by October 2023, barring unforeseen geopolitical and meteorological events. It is also important to note that the Security of Gas Supply Regulation 2017/1938 (last amended by the above Regulation (EU) 2022/1032 on gas storage) has provisions to ensure energy security by helping to prevent supply disruptions, respond to them when they occur, and ensure that vulnerable consumers are always supplied.

Council Regulation (EU) 2022/2576 of December 2022 enhancing solidarity through better coordination of gas purchases, reliable price benchmarks and exchanges of gas across borders (the ‘Solidarity Regulation’) included measures improving the security of gas supply and addressing gas price volatility. The EU Energy Platform was established to coordinate EU action and negotiations with external suppliers of natural gas and LNG through voluntary joint gas purchasing (see also ‘In focus’ box on AggregateEU).

In focus: AggregateEU
AggregateEU is a demand aggregation and joint purchasing service under the EU Energy Platform in accordance with Council Regulation (EU) 2022/2576 (the ‘Solidarity Regulation’). Its objective is to contribute to the security of supply in terms of both volume and affordability. It covers both pipeline gas and LNG, but excludes Russian supplies. The mechanism matches buyers and sellers via tenders on a bimonthly basis. On the demand side, companies established in the EU or Energy Community countries can participate, while sellers may also include non-EU companies. Gas purchasing through AggregateEU is not mandatory; however, Member States are obliged to participate in the demand aggregation process by submitting a certain volume for demand aggregation (equivalent to 15 % of their obligation under the gas storage regulation; demand aggregation on top of this is voluntary). The first call under the AggregateEU mechanism was launched in April 2023. By mid-May, 77 European companies had submitted requests for a total volume of approximately 11.6 bcm of gas.
Source: European Commission, Joint gas purchasing and AggregateEU – questions and answers.

Figure 40 – Timeline of selected energy policy-related events Obstacles to implementation of response

Energy security is a shared EU competence under Article 194 of the Treaty on the Functioning of the European Union (TFEU), which provides a legal basis for EU energy policy. There is thus no obvious legal obstacle to strengthening energy security at EU level. However, the same Treaty article also stipulates that Member States are responsible for their energy mix and the general structure of energy supply. The coordination of EU energy systems thus depends on political choices by individual Member States to a certain extent. Moreover, the Member States have a major role in financing and scaling up renewables, for instance through market incentives. They also make decisions on creating energy interconnectors with other countries. Permitting procedures for renewables, even if facilitated through EU-level legislation (for instance, under REPowerEU and the solar energy strategy), also require the participation of the national and local levels to bring about tangible outcomes.

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Future Shocks 2023: Responding to the instrumentalisation of migration

Tue, 08/08/2023 - 18:00

Written by Costica Dumbrava.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

In 2021, the attempts by the Belarusian government to destabilise the EU by encouraging irregular migrants to cross into the EU triggered a prompt policy response to tackle the risk of instrumentalisation of irregular migration at the EU’s external borders. Migrant instrumentalisation affects the EU’s and Member States’ capacity to protect external borders and creates humanitarian crises by trapping irregular migrants between borders. Although this is not a new phenomenon, such situations might multiply and broaden in the future, given the current international context of conflict and hostility, rising migration, and hardening of borders. The EU and its Member States have adopted a series of measures to address migrant instrumentalisation, which include border control measures, new legislation, sanctions, and diplomatic and humanitarian actions. A more comprehensive toolbox is currently under development, but its effectiveness is yet to be tested, including how it contributes to the protection of the EU’s borders, ensures the protection of fundamental rights (such as the principle of non-refoulement), and addresses the root causes of migrant instrumentalisation.

Position of the European Parliament

The European Parliament has strongly criticised the Belarusian government for its failure to respect human rights, including for its persecution of political opposition, attacks on media freedom and civil society, and flawed parliamentary elections. In its June 2021 resolution on systematic repression in Belarus and its consequences for European security, the Parliament expressed ‘concern regarding the increase in irregular migration from Belarus into the EU and about the potential involvement of Belarusian authorities in this phenomenon’, and called for the Member States and EU institutions ‘to follow developments in these areas and take the appropriate measures’. During a debate in November 2021 on the conclusions of the European Council, MEPs expressed different views on the nature of the crisis in Belarus, with some considering it a migration crisis and a hybrid attack on the EU, and others seeing it rather as a humanitarian crisis.

In its February 2022 resolution on the implementation of the common security and defence policy, the Parliament considered ‘the instrumentalisation of migration flows through the EU’s eastern external borders coupled with disinformation campaigns to be a form of combined hybrid warfare that aims to intimidate and destabilise the EU’. It called on the Union ‘to develop relevant legislation providing necessary safeguards to effectively react and respond to the instrumentalisation of migration for political purposes by third countries, to ensure the effective protection of the EU’s external borders and the protection of human rights and human dignity’. The Parliament also called on the Union and the Member States ‘to improve their capabilities to identify hybrid threats’.

In focus: EU agencies helping to tackle instrumentalisation of migration
The European Border and Coast Guard Agency (Frontex) supports EU Member States and Schengen-associated countries in the management of external borders. The agency is tasked with key roles in monitoring migratory flows, managing the European Border Surveillance System (EUROSUR) to ensure situational awareness and effective information exchange, and preparing risk analyses with a view to developing early warning mechanisms about the situation at the external borders. The agency can deploy standing corps in the framework of border management teams, migration management support teams and return teams. It can assist a Member State faced with a situation of specific and disproportionate challenges by deploying rapid border intervention teams. Between July and November 2021, Frontex deployed a rapid border intervention in Lithuania comprising 384 standing corps and 28 interpreters, as well as technical equipment. According to the Commission, as of November 2021, seven Frontex officers were deployed at the Latvian border with Belarus.
The European Union Asylum Agency (EUAA) assists Member States in implementing the Common European Asylum System (CEAS). Its reinforced mandate (Regulation (EU) 2021/2303), which entered into force in January 2022, allows the agency to quickly deploy asylum support teams to assist Member States with operational and technical measures, in particular where asylum and reception systems are subject to disproportionate pressure. In 2021, EUAA provided immediate support to the Lithuanian asylum and reception authorities through the rapid deployment of asylum support teams and the provision of interpretation services. The agency also deployed 36 interpreters to Latvia to help with the implementation of asylum and reception procedures.
The EU Agency for Law Enforcement Cooperation (Europol) supports Member States’ law enforcement authorities and facilitates cooperation to prevent and combat serious and organised crime. Europol’s European Migrant Smuggling Centre (EMSC) proactively supports EU Member States in dismantling criminal networks involved in organised migrant smuggling. In February 2022, Europol set up the Operational Taskforce Flow (OTF) to support national authorities in combating the increased migrant-smuggling activities across the EU-Belarus border, which led to dozens of arrests and asset seizures. Europol also coordinates referral actions targeting media accounts facilitating the illegal immigration from Belarus to Europe.

Figure 37 – Pyramid of instruments at the disposal of the EU and its Member States EU policy responses (Commission and Council responses so far)

At the European Council meeting in June 2021, the EU leaders condemned all attempts by third countries to instrumentalise migrants for political purposes. In response to Belarus’ hybrid attack against several Member States, the EU expanded its common foreign and security policy (CFSP) sanctions against Belarus. It imposed, in several rounds, individual restrictions (entry bans and asset freezes) on persons linked to the instrumentalisation campaigns, banned Belarusian carriers from entering EU airspace and accessing EU airports, and imposed targeted restrictions on companies, tour operators and hotels that have organised or facilitated irregular migration from Belarus into the EU. The EU offered immediate support to the affected Member States, including through the Union Civil Protection Mechanism and the involvement of EU agencies (Frontex, EUAA, Europol), and mobilised additional funds to assist humanitarian agencies on the ground. The new EU migration preparedness and crisis management network (Blueprint network) provided situational awareness and ensured a coordinated operational response. As of January 2022, the Operational Coordination Mechanism for the External Dimension of Migration (MOCADEM) has been used in the Council to coordinate and monitor the implementation of the EU’s external migration policy. The European External Action Service (EEAS) also stepped up its work to counter false and misleading information online, focusing on where migrants exchange information and where Belarus and migrant smugglers may stimulate demand for irregular migration. In November 2021, the EU partially suspended the EU-Belarus visa facilitation agreement.

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In December 2021, the Commission presented a proposal for a regulation addressing situations of instrumentalisation in the field of migration and asylum – allowing affected Member States to derogate from common rules on asylum and return when confronted with situations of instrumentalisation of migration. Special provisions on the instrumentalisation of migration (including a definition thereof) were included in a proposal to revise the Schengen Borders Code (SBC), which will also allow Member States to take more restrictive border control measures when confronted with such situations. The Commission also put forward a proposal to prevent and restrict the activities of transport operators that engage in or facilitate smuggling or trafficking of people into the EU, as well as a proposal for a Council decision on provisional emergency measures for the benefit of Latvia, Lithuania and Poland (based on Article 78(3) TFEU on provisional measures in the event of a ‘sudden increase of arrivals of third-country nationals).

These initiatives complement pre-existing measures aiming to strengthen the management of the EU’s external borders, including the creation of the European Border and Coast Guard Agency (EBCGA/renewed Frontex), the establishment of European integrated border management, the expansion of the EU’s architecture of information systems for border management and security, and the launch of a new Schengen governance model. Instrumentalisation measures also fit into a more comprehensive effort to reform the EU migration and asylum system, embodied in the 2020 pact on migration and asylum. The pact includes a proposal to establish a procedure for screening third- country nationals apprehended crossing the external borders irregularly and a proposal for a regulation addressing situations of crisis and force majeure in the field of migration and asylum.

Concrete measures to counter instrumentalisation are also provided in the EU’s 2021 renewed action plan against migrant smuggling (2021-2025). The Commission’s 2023 operational strategy for more effective returns also highlighted the importance of coordination at EU level and the use of Frontex’s support on returns in the context of the instrumentalisation of irregular migration by the Belarusian regime. The Commission also proposed an EU police cooperation code to enhance law enforcement cooperation across Member States and give EU police officers more modern tools for information exchange.

Figure 38 – Timeline of responses to the instrumentalisation of migration Obstacles to implementation of response

Prompt measures by the affected Member States and the EU to counter the instrumentalisation of irregular migration by Belarus resulted in a significant decrease in irregular migration along the eastern land border), although the humanitarian crisis is not over. In the meantime, plans to set up a more comprehensive EU approach to tackle instrumentalisation of irregular migration has not advanced much. So far, none of the relevant proposals put forward by the Commission reached the inter-institutional negotiation phase in the legislative process. In the Council, the Member States could not agree on the instrumentalisation proposal (a partial general approach was rejected in December 2022). The provisions on instrumentalisation included in the proposal revising the SBC have also been contested in the Parliament.

Stakeholders have expressed concerns about creating a special legal regime for situations of instrumentalisation of irregular migration. First of all, it is argued that the normative definition of instrumentalisation of migration is too broad and unclear from a legal perspective. According to another view, there is a risk that the narrative of instrumentalisation is used to ‘normalise’ the use of detention and accelerated border procedures as standard migration management tools. By reducing legal safeguards and allowing for differentiated implementation of EU rules, the proposal may undermine the EU asylum system and EU law as a whole. The proposal may also be misguided, as it seems to punish the victims of instrumentalisation, and dehumanise them, instead of taking aim at third-country governments trying to destabilise the EU.

Disagreements on measures to counter instrumentalisation tie in with slow progress on the reform of the EU migration and asylum rules. Nevertheless, a breakthrough agreement in the Council in June 2023 on two key proposals is set to unblock the legislative process, potentially leading to the finalisation of the reform by spring 2024 (in line with a previous commitment by the co-legislators).

The Belarus crises provided an opportunity for the EU and the Member States to step up coordination and test the existing crisis response mechanisms (such as the new Blueprint network). Despite positive developments, the tendency to multiply crisis response mechanisms with each crisis may lead to duplication and further fragmentation. Further delays in the implementation of EU border management policies, including the deployment of new information systems and in the implementation of information exchange within the European border surveillance framework, may reduce EU and Member State capacity to anticipate and respond effectively to crisis.

Policy gaps and pathway proposals

In its 2022 Strategic Compass for stronger EU security and defence, the Council identified the instrumentalisation of irregular migration as one of the threats to European security and committed to substantially enhancing the EU’s resilience and ability to counter such hybrid threats. The Compass envisages the creation of an EU hybrid toolbox providing ‘a framework for a coordinated response to hybrid campaigns, including situations of instrumentalisation of migration’.

In June 2023, the Commission unveiled a toolbox to address the use of commercial means of transport to facilitate irregular migration to the EU. This includes the possibility to suspend or revoke the operating licence of an EU air carrier and the use of CFSP restrictive measures to target relevant transport operators facilitating irregular migration to the EU, improve situational awareness through reinforcing the Blueprint network and enhanced internal cooperation and information exchange, and engage with transport operators and authorities in third countries, especially in the aviation sector (such as by posting liaison officers at key airports).

Developing comprehensive, balanced, tailor-made and mutually beneficial migration partnerships with third countries is a key dimension of the pact on migration and asylum and is also key to addressing instrumentalisation of migration. This was proven during the Belarus crisis, when joint outreach efforts led to positive reactions in countries of origin and transit, such as the temporary suspension of flights from Iraq to Minsk. In its 2021 renewed EU action plan against migrant smuggling, the Commission proposed establishing ‘tailor-made Anti-Smuggling Operational Partnerships based on continuous exchange and mutually beneficial cooperation between the EU and the partner countries’, which would also include dialogue and coordinated engagement on state-led instrumentalisation of migration. The Commission also suggested the use of restrictive measures under the EU global human rights sanctions regime to target individuals, entities and bodies participating in state-led instrumentalisation schemes, and to take measures ‘in the area of visa, trade, development, financial assistance and others’. In May 2023, the Commission announced that it is preparing a comprehensive report on the EU’s visa-free regimes with a view to improving the visa suspension mechanism, in order to address newly emerging situations in which the visa-free regime could be abused and result in irregular migration or security risks for the EU.

Several papers provide further suggestions on how to improve the EU’s approach to the instrumentalisation of irregular migration. At operational level, a paper by the European Policy Centre argues that the EU needs to further improve its migration crisis response by pooling and streamlining relevant information and data on potential migration crises (and designate a ‘crisis hub’), strengthening intra-EU collaboration, and forming and maintaining international alliances. While acknowledging issues with the accountability framework regarding the operation of EU agencies, another paper argues that timely interventions by these agencies could help the Member States to manage migration without activating the problematic derogations provided in the instrumentalisation proposal. According to a paper by the Jacques Delors Centre, the EU and its Member States should revisit their approach to the instrumentalisation of migration by focusing on identifying their strategic objectives (avoid stepping into third countries’ ‘hypocrisy trap’), revise existing partnerships with third countries to provide more incentive for cooperation (expand legal migration pathways), and avoid a security narrative that frames the instrumentalisation of migration as a hybrid security threat. Another paper, by the Clingendael Institute, argues that the EU needs to take a geopolitical perspective on migration and focus on developing sustainable migration partnerships with third countries based on a common interest in controlled migration.

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Categories: European Union

Future Shocks 2023: Reinforcing the resilience and long-term coordination of EU internet infrastructure

Fri, 08/04/2023 - 18:00

Written by Stefano De Luca and Tambiama Madiega.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here. The issue(s) in short: The challenge and the existing gaps

A range of events may affect the functioning of internet infrastructure, including unintentional technical failures, cyber-attacks, physical attacks to the core infrastructure, technology dependency creating backdoors for spying activities, and the rise of internet fragmentation (also called ‘splinternet’).

Resilience against natural disasters and assuring connectivity without disruptions: Global internet connectivity is at risk from climate disasters such as flooding, storms and hurricanes, as these types of extreme weather events are becoming more likely due to climate change. Because of rising sea levels, telecoms conduits in coastal areas might be surrounded by water in the next 10 years. Unintentional severing of submarine cables linked to human activities represents another potential cause of internet disruption. To tackle such unintentional technical failure, global common efforts to fight climate change and to build future-proof connectivity infrastructure should be put in place.

Sophisticated cybersecurity threats by state and non-state actors are on the rise in Europe: According to a recent report, EU countries have seen a sharp increase in cyber-attacks in 2023, probably linked to the conflict in Ukraine; this type of cyber war is targeting critical national infrastructure. There are growing concerns about links between malicious cyber activities and disinformation, which also affects internet users’ trust. There is a global shortage of skilled cybersecurity professionals to help businesses and organisations defend themselves against cyber-attacks – Europe alone is estimated to be short of between 260 000 and 500 000 such workers. Improving EU cybersecurity for large-scale attacks, affordability of the more advanced cybersecurity technologies for telecoms infrastructure (e.g. quantum communication infrastructure) and cyber defence exercises are key to avoiding internet disruptions.

Protecting key connectivity infrastructure from physical attacks: In January 2022, the submarine cable connecting Norway with the Arctic satellite station was mysteriously severed; in May 2023, NATO’s intelligence chief warned that Russia might sabotage submarine cables to punish Western nations for supporting Ukraine; and in October 2022, Russia threatened to shoot down Western satellites helping Ukraine. Building a comprehensive strategy for patrolling strategic submarine cables points with allies, improving the EU’s capability to repair connectivity infrastructure, and creating connectivity redundancy through the presence of alternative infrastructure (e.g. an EU low-earth-orbit ‘LEO’ satellite constellation serving as a back-up to the current European internet) should be further developed to respond to potential challenges.

Limiting dependence on foreign technology in the EU connectivity sector: Most European countries have taken measures to restrict or prohibit the use of high-risk vendors to build national 5G infrastructure. However, positions on banning Chinese equipment (e.g. Huawei and ZTE) in the roll-out of 5G networks on the grounds of significant intelligence and operational risks differ among NATO allies and EU Member States. The future EU satellite system would guarantee fewer dependencies on third-country infrastructure (e.g. Starlink) and provide secure telecommunications so that EU information does not fall under foreign privacy and data management laws. Keeping EU data secure is also related, to some extent, to ownership or control of submarine cables and cloud ecosystems. Various reports have accused China of planning to exploit the construction of submarine cable networks to spy on other countries; the same fear is shared by China, which is reportedly impeding submarine internet cable projects near its borders. Furthermore, the EU cloud ecosystem is now dominated by foreign companies, meaning that the EU will have to accept long-lasting foreign dependency and, thus, lasting risks to its strategic autonomy, with potential concerns for access to EU data. Meanwhile, scrutiny of foreign acquisition of EU strategic assets that might pose a risk to security (EU foreign investment screening mechanism) is increasing, specifically over Chinese investments.

Addressing the risk of internet fragmentation: The vulnerabilities of internet infrastructure increasingly relate to internet fragmentation or splinternet, i.e. the different ways the internet’s technical architecture evolves due to technological, commercial and political factors. A number of recent examples show how the global internet is increasingly morphing into different infospheres. The EU has long argued for greater autonomy in the digital field and the US is also adopting this approach (for instance, a bill has been introduced recently to prohibit the Chinese-based TikTok app from being downloaded on US devices, given security issues) while China, Russia and India are actively seeking to develop their own internet, distinctively different from the rest of the web. China’s support for a ‘cyber sovereignty’ model under which countries should choose their own path of network development and governance model (including the use of technical standards like IPv6) raises many issues with regard to control of the internet. Furthermore, a recent report shows a surge of internet shutdowns due to political factors such as protests or armed conflicts.

Position of the European Parliament

Parliament has repeatedly called for action at EU level to tackle hybrid threats and address possible failures of critical infrastructure, including communications networks. In its landmark resolution on the state of EU cyber defence capabilities – adopted in 2021 – Parliament articulated the need for the EU to address cyber threats in an international context. It stressed that the EU is increasingly involved in hybrid conflicts with geopolitical adversaries that destabilise democracies, and called on all Member States and the EU to show leadership during discussions and initiatives under the auspices of the UN and to take a proactive approach to the establishment of an internationally shared regulatory framework for tackling cyber threats. Parliament also called for increased EU coordination on establishing collective attribution for malicious cyber incidents and urged Member States to implement redundancies into their critical infrastructure systems, such as electricity generation and strategic communications, at all levels. Furthermore, in the context of Russia’s aggression against Ukraine, Parliament highlighted the need for the EU to bolster its own resilience to hybrid attacks and to help improve its allies’ resilience capacities against possible Russian attacks in the areas of defence, cybersecurity and strategic communication.

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EU lawmakers have endorsed the quest for technological sovereignty on many occasions. Parliament called on the Commission to develop a strategy to reduce Europe’s dependency on foreign technology in cybersecurity, particularly towards China. Parliament also called for the EU to develop effective strategies in digital policy in order to use technological standards and the open internet to support free spaces and restrict oppressive technologies. Furthermore, Parliament called on the Member States to make sure that public institutions and private companies involved in ensuring the proper functioning of critical infrastructure networks (e.g. telecoms networks) undertake some risk assessments linked to dependence on external suppliers of hardware and software technologies. In a recent resolution, Parliament asked the Council and the Commission to develop an ambitious, binding ICT supply chain security framework and to exclude the use of equipment and software from manufacturers based in high-risk countries, particularly China and Russia.

Finally, in 2009 Parliament adopted a key resolution setting out its view on internet governance. It stressed that, to maintain the internet as a global public good, internet governance should be based on a broad, balanced public-private sector model, should avoid attempts by state or supra-national authorities to control the flow of information on the internet, and should rest on a multi-stakeholder process that provides an effective mechanism for promoting global cooperation. In 2015, Parliament reiterated its commitment to the multi-stakeholder model of internet governance and emphasised the importance of completing the globalisation of the internet’s core functions and organisations.

In focus – Quantum communication infrastructure
Quantum technology is increasingly considered around the world as an emerging, highly strategic technology that could play an important role in safeguarding critical infrastructure and personal data security.
A 2022 Joint Research Centre report stressed how deploying quantum communication infrastructure would strengthen the cybersecurity protection of European telecoms networks as well as the transmission of very sensitive information by using robust cryptography systems.
Among its several goals, Digital Decade, Europe’s overarching digital transformation strategy, envisages Europe ‘being on the cutting edge of quantum capabilities by 2030’. To achieve this goal, the EU is promoting various programmes, including the deployment of a secure quantum communication infrastructure. Such an infrastructure will include a terrestrial segment that relies on fibre networks and a space segment based on satellites.

Figure 35 – Pyramid of instruments at the disposal of the EU and its Member States EU policy responses (Commission and Council responses so far)

Achieving more resilient and future-proof connectivity by 2030: With the Path to the Digital Decade programme, the EU set its Digital Decade targets, including having all EU households covered by a fixed gigabit network (1Gbps) and all populated areas covered by 5G by 2030. The European Electronic Communications Code (EECC) sets common rules on how electronic communications networks and services are regulated in the EU; the general aim of the EECC is to promote deployment, access to and take up of ‘very-high capacity networks’ (VHCN, e.g. fibre and 5G). Fibre networks seem to be more resilient to natural disasters, and the EU is striving to be the first climate-neutral continent by 2050. With the Broadband Cost Reduction (BCRD), the EU lowered entry barriers and costs related to network deployments by setting out harmonised rules on access to the physical infrastructure of all utilities for the purpose of building broadband networks (ducts, poles, masts, etc.). The ‘Connectivity Toolbox‘, a non-binding recommendation agreed by Member States in March 2021, includes 22 best practices to help reduce VHCN network deployment costs. In addition, many funding initiatives are supporting the deployment of broadband networks in rural, remote and other less well-served areas, such as the Connecting Europe Facility (CEF Digital), post-COVID-19 recovery funds and national state aid initiatives. To help achieve the Digital Decade connectivity targets, the Commission proposed a connectivity package in February 2023 including the Gigabit Infrastructure Act (GIA), a draft recommendation to promote gigabit connectivity, and an exploratory consultation on the future of electronic communications infrastructure.

Reinforcing EU capacities to tackle cyber threats: The EU cybersecurity strategy aims to ensure a global and open internet with strong guardrails to address the risks to the security and fundamental rights and freedoms of people in Europe. In this context, a directive on measures for a high common level of cybersecurity across the Union (NIS 2) has been finalised and the EU Cybersecurity Act has strengthened the role of the EU cybersecurity agency (ENISA) and is promoting a voluntary EU cybersecurity certification scheme for ICT products, services and processes. The EU recently proposed the EU Cyber Resilience Act (CRA), which introduces mandatory cybersecurity requirements for products with digital elements. The quantum infrastructure initiative (EuroQCI) will safeguard sensitive data and critical infrastructure by adding a new layer of encryption and security in the field of telecommunications. As far as cyber defence capabilities are concerned, the EU has approved the Strategic Compass, which, among its actions to strengthen EU security and defence policy by 2030, lays out plans to create an EU hybrid toolbox to coordinate EU and Member State responses to hybrid attacks. The EU also plans to create EU cyber rapid response teams, which would provide tailored national, civilian and military expertise to support the EU and partner countries in countering hybrid threats. The Commission has recently proposed the EU Cyber Solidarity Act to reinforce capacities in the EU to detect, prepare for and respond to the growing cybersecurity threats and attacks across the EU. Finally, to answer the EU’s cybersecurity workforce needs, the Commission adopted the Communication on the Cybersecurity Skills Academy in April 2023.

Reducing EU technology dependency in the field of connectivity: As far as 5G technology dependency is concerned, the Commission published the EU toolbox on 5G cybersecurity, in which it outlined a set of non-binding key actions to ensure the security of the networks, such as limiting dependency on a single supplier (multi-vendors strategy) and assessing the risk profile of supplies. In a 2023 communication, the Commission stressed that Chinese vendors Huawei and ZTE represent a materially higher risk than other 5G suppliers. Therefore, Member States’ decision to restrict or exclude Huawei and ZTE from 5G networks are justified and compliant with the EU toolbox on 5G cybersecurity, and those suppliers will be progressively phased out from existing connectivity services of the Commission’s sites. The new regulation on the Union secure connectivity programme entered into force in March 2023; building on EU-funded initiatives for the period 2023-2027, the programme will develop an LEO satellite constellation to secure communication and avoid critical dependencies on non-EU infrastructure. The Global Gateway strategy, launched in 2021, also aims to ensure secure and resilient routes of international communication infrastructure, such as the BELLA programme for submarine cables; the EU is planning a Black Sea submarine cable to reduce reliance on Russia. Furthermore, in its 2023 joint communication on an ‘enhanced EU maritime security strategy for evolving maritime threats’, the EU has identified a number of key future actions, including promoting international cooperation on information exchange, and surveillance of critical maritime infrastructure such as submarine cables; and improving the current EU risk assessments on submarine cables and the risks and threats arising from foreign direct investment (FDI) in maritime infrastructure. Gaia-X aims to create a federated cloud data infrastructure at European level and ensure a secure environment for the data of citizens, businesses and governments. Finally, the EU has implemented a regulation establishing a framework for screening FDI inflows into the EU on grounds of security or public order. To address the risk of the EU increasingly relying on a non-EU domain name system (DNS) resolver to access a webpage and tackle potential internet disruptions due to cyber/technical incidents, the EU would support the deployment of European DNS resolver service infrastructure (DNS4EU) and encourage EU companies, internet service providers and browser vendors to diversify their dependence on foreign DNS resolution services.

Addressing the risk of physical attacks on internet networks: The EU has been taking steps in recent years to better face possible attacks on its communications infrastructure. EU lawmakers adopted the directive on the resilience of critical entities (CER) in December 2022, which aims to reduce the vulnerabilities and strengthen the physical resilience of critical entities in a range of sectors – including digital infrastructure – that provide vital services on which the livelihoods of EU citizens and the proper functioning of the internal market depend. The CER directive requires Member States to identify critical entities, perform risk assessments and report any disruptions; it also requires them to increase resilience and conduct regular stress tests, including on submarine cables. Finally, in the multilateral context, in February 2023 NATO announced the creation of a critical undersea infrastructure coordination cell at NATO Headquarters and has established a new NATO-EU taskforce on resilience and critical infrastructure protection working on better understanding threats to critical submarine infrastructure and sharing best practices on cooperation and coordination. Furthermore, the EU is promoting international cooperation on information exchange and the surveillance of critical maritime infrastructure, including submarine cables, in accordance with Council Recommendation 2023/C 20/01 on a Union-wide coordinated approach to strengthen the resilience of critical infrastructure.

Addressing the risk of internet fragmentation: The EU has launched or joined a series of new multilateral and bilateral initiatives to promote an open and global internet. At multilateral level, in the context of the Global Gateway strategy, the EU committed to funding the deployment of third countries’ infrastructures with standards and protocols that support an open, plural and secure internet in line with EU policies. The Commission also works at international level with other global players to shape the development of the internet and means of telecommunication through the global digital compact concept developed under the UN. In this respect, the EU proposes to promote a set of commitments to avoid internet fragmentation. Furthermore, the Group of Seven (G7), to which the EU belongs, committed to cooperating on making visible and tackling the tactics of digital authoritarianism, and to strengthening cooperation in addressing practices such as internet shutdowns. At bilateral level, in the context of the Transatlantic Trade and Technology Council (TTC), the EU and the US have pledged to advance the principles of the Declaration for the Future of the Internet, including fostering a global internet, and oppose the increasingly-used practice of government-imposed internet shutdowns. The EU and the US have created a multi-stakeholder group of technical experts tasked with documenting internet shutdowns and their effects on society; the group will also encourage compatible standards and regulations based on shared democratic values. This approach is expected to reduce the gap between the regulation of platforms that affect the entire internet ecosystem and foster technical and commercial internet fragmentation.

Figure 36 – Timeline of selected measures to reinforce the resilience and long-term coordination of EU internet infrastructures Obstacles to implementation of response

Addressing the investment gap for future-proof and more resilient network infrastructure deployment is key to meeting the Digital Decade 2030 targets and would require large-scale EU public funding. Reports commissioned by large telecom operators estimated that an additional €150 billion of investment is needed for full 5G rollout, while another €150 billion is required to upgrade existing fixed infrastructure and roll out fibre networks to gigabit speeds in Europe. According to a study prepared for the Commission, the latest estimates quantify the investment still needed in network infrastructure to reach the 2030 targets at around €174 billion.

Lack of collective situational awareness of cyber threats through a systematic and comprehensive information sharing system and a common approach to network equipment deployment is an obstacle for the EU, as the security of networks cuts across national and EU competences and affects national security. For instance, the recent report on Member States’ progress in implementing the EU toolbox on 5G cybersecurity stressed how there are still differences in the state of implementation of specific measures between Member States. Furthermore, the report recommended that Member States should implement the non-binding toolbox without delay, considering the importance of the connectivity infrastructure for the digital economy and dependence of many critical services on 5G networks. The Commission also requested ENISA to develop a candidate European cybersecurity certification scheme for 5G networks (EU 5G scheme) under the Cybersecurity Act. However, such schemes are voluntary – unless otherwise specified by EU or Member State regulations – and ENISA will have to encourage and monitor the adoption of shared standards under the Cybersecurity Act.

A challenge to the EU’s critical infrastructure protection efforts is that Member States are reluctant to cooperate. For instance, some Member States have expressed reluctance to share information about their critical infrastructure – particularly submarine cables – and push back on involving the EU in collaborating on this matter. With regard to the investment promises of the Global Gateway strategy, there are uncertainties over whether sufficient funding can be mobilised and it remains to be seen if the approach of bringing together the EU, financial institutions and Member States will deliver.

The EU foreign investment screening mechanism (FDI legal framework) falls short of delegating any veto or enforcement rights to the EU. This means that Member States have the final word on FDI controls, on top of which the absence of screening mechanisms in some Member States diminishes the effectiveness of the EU framework. The Commission is also in the process of evaluating the current framework and will propose its revision before the end of 2023.

The EU lacks a coherent approach to the internet fragmentation phenomenon. While committing to promote the development of an open internet, the EU has increasingly passed measures to better control its digital environment. Achieving ‘technological autonomy’ or ‘digital sovereignty’ – for instance through the development of a sovereign EU cloud, which could imply data localisation in the EU, or platform regulation like the Digital Services Act that imposes more stringent rules on internet intermediaries in the EU than in other jurisdictions – have been seen as fostering fragmentation. The EU lacks an articulated and coherent approach to address the technological, commercial and political factors that contribute to internet fragmentation, while a number of digital files (e.g. DSA, DMA, AI Act, Data Act) – which are currently being implemented or discussed by EU lawmakers – have direct implications for the openness and unity of the internet.

Policy gaps and pathway proposals

Supporting technology migration to fibre networks: There are voices arguing that one way to mitigate disruption of the network linked to natural disasters such as weather events would be to replace copper wiring with more resilient optical fibre cables. The authors of a 2020 study flagged how modern fibre networks are 70-80 % more reliable than copper ones and require less operational maintenance. The study suggested that Member States and the EU might take some action to ease the migration from copper to fibre networks, such as reducing the timeframe for copper decommissioning or intervening on wholesale copper prices. Specifically, the EU could update the relevant EU texts to speed-up technology migration (e.g. EECC, 2010 NGA Recommendation, 2013 Costing and Methodologies Recommendation).

Investing in cyber skills capacity: The EU should invest in building the capacity to improve the attribution of cyberattacks and to address incidents. Ensuring appropriate funding for training skilled cybersecurity professionals needed by the sector is key to protecting Europe’s critical infrastructure.

Fostering quantum-based cybersecurity: The European Joint Research Centre report of 2022 stressed how the EU’s investment and research in developing quantum communication infrastructure can play a role in protecting European terrestrial fibre and satellite infrastructure from cyberattacks.

Physical protection of submarine cables: Various authors have presented ideas on how to protect submarine internet cables in Europe. The creation of cable protection zones (e.g. banning certain types of anchoring and fishing) in critical areas within national waters would help to avoid unintentional severing of cables by following the examples set in Australia and New Zealand. In this respect, a European Parliament analysis suggested that Parliament could invite maritime authorities to suggest solutions. A 2022 policy brief by the Atlantic Centre considered investing in submarine cables’ sensors/detection systems on critical points to be a useful tool to detect potential physical threats; Member States should envisage the use of such detection systems as part of licence requirements for landing submarine cables and the EU could sponsor research in this field and make recommendations on the allocation of licences. Finally, following the example of the Australian government, which appears to have concluded that ownership of certain submarine cables is of strategic concern, a European Commission study recommends that the EU create a comprehensive and common approach to support EU-based companies in the development and construction of new secure submarine cable routes. A European review of submarine cable ownership and risk assessment for future submarine cable projects might help in making potential strategic decisions.

Protecting EU strategic infrastructures from cyber threats: The European Court of Auditors (ECA) is worried about divergent polices on 5G suppliers among Member States and has recommended that the Commission assess the potential impact of a Member State building its 5G networks using equipment from a vendor considered to be high risk in another Member State. According to the ECA, such a scenario could impact cross-border security and even the functioning of the EU single market itself. The authors suggested taking a more general vendor-agnostic approach when assessing security of network infrastructure or components (e.g. 5G or submarine cable systems), by implementing technical testing facilities at national level, because poor quality software might also be a greater risk for cyber resilience than ‘backdoors’. In this respect, establishing a compulsory EU-wide certification scheme (and not merely a voluntary one, as is the case today) would be a step forward in ensuring a truly safe environment, especially for 5G networks, and could help establish the EU as a standard-setter in the field of cybersecurity. Similarly, the Commission could take further initiatives to support the comprehensive implementation of the non-binding 5G toolbox in case of lack of action by Member States.

Developing an EU strategy and tools to avoid internet fragmentation: While the ‘Brussels effect’ (i.e. the ability of the EU to export its legal and commercial standards at the global level) could pave the way for convergence of legislation across the world (as for the GDPR), the EU must be complemented by a strategy to build international alliances, especially in areas where Europe has dependencies and gaps. Against this background, a European Parliament study recommends setting up an EU interinstitutional working group on digital diplomacy including the Parliament, the relevant Commission services (i.e. the Service for Foreign Policy Instruments (FPI), as well as DG INTPA, DG NEAR and DG CNECT) and the European External Action Service (EEAS) to develop a joint action plan on digital diplomacy. The working group would work on the international dimension of digital policy, both to export EU standards and principles and to build alliances around the European model. Furthermore, there should be an impact assessment mechanism to assess if the EU initiatives that may act as factors of divergence are proportionate. This approach would allow the EU to develop a consistent approach towards internet fragmentation.

Supporting a multilateral approach to internet governance: Tackling internet fragmentation will require the EU to strengthen its engagement at multilateral level. Some academics have called for establishing clear norms regarding prohibitions against internet shutdowns and long-term internet controls and creating a multilateral entity responsible for codifying and enforcing this norm. Others argue that a co-regulatory approach to internet platform governance would help to align different legal systems and societal norms. The UN has outlined possible solutions to reinforce the multi-stakeholder governance of the internet and address the risks of internet fragmentation that will be discussed in the 2024 Summit of the Future. Accordingly, it has been proposed that nations commit to avoiding blanket internet shutdowns, take only proportionate, non-discriminatory and targeted measures to control internet content in accordance with international human rights law, and refrain from actions that would disrupt, damage or destroy critical infrastructure that provides services across borders and underpins the general availability and integrity of the internet. In the same way, the different internet governance institutions and initiatives (e.g. ICANN, the Internet Society, the UN) should focus on building norms and principles that can unify the evolving distributed internet governance system. Against this background, the EU could build alliances (multilateral or bilateral) to foster the adoption of international communication standards in line with its principles.

Possible action
Categories: European Union

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