EU struggles to save face at COP27

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Europe’s climate credentials are coming under fire at COP27 in Egypt, amid dwindling domestic support for green legislation in the current economic context. We’ll bring you the latest on that, as well as a glimpse of how the bloc’s gas price cap is taking shape and why calling it a “cap” might be an overstatement.

In the US, midterm elections didn’t bring about the “red wave” Republicans had hoped for, even as they seem set to take control of the House of Representatives.

After proposing assistance for Ukraine totalling €18bn for 2023 yesterday, European Commission chief Ursula von der Leyen visits Moldova today — the other new EU candidate country in Moscow’s crosshairs.

Evaporating Green Deal

EU negotiators at the UN’s climate conference are feeling the heat not just from the Egyptian sun but also when defending the bloc’s Green Deal, as policymakers at home seek to postpone key parts of it, writes Alice Hancock in Brussels.

“Let us not take the highway to hell,” commission chief Ursula von der Leyen said yesterday at COP27, “but earn our clean ticket to heaven”.

Her message is not fully backed by the bloc, amid increasing wariness that steeper climate ambitions are counterproductive in the current mix of strains on the industry, stemming from inflation, the war in Ukraine and high energy costs.

“We have to see it from the point of view of the industries,” Jozef Síkela, the Czech energy minister whose country currently holds the rotating EU presidency, told the Financial Times. Rules brought forward as part of the EU’s “Fit for 55” proposals (designed to cut the bloc’s emissions by 55 per cent by 2030) were adding extra costs to already struggling companies, he argued. “They are saying each additional unnecessary burden you are imposing on us basically leads to the fact that we need to focus on much more things than needed,” he said. (Read more of that interview here.)

His line of thought is backed by many policymakers, not least the European parliament’s largest grouping, the European People’s party (and von der Leyen’s own political family), which put together an informal list of pieces of legislation it believes should be postponed until after the crisis.

​On the list, seen by Europe Express, are proposals such as the industrial emissions directive, which aims to control industrial emissions in the EU; and the corporate sustainability due diligence, a regulation to increase companies’ responsibility for environmental and human rights abuses in their supply chains​.

The EPP has already celebrated a victory in getting a set of rules to limit harmful chemicals in the environment (REACH), pushed back until the fourth quarter of next year, according to the commission’s latest work programme.

In a recent blog post, Christian Ehler, an EPP lawmaker who sits on the industry committee, said that having to take on more new regulation meant “companies need to spend additional money on top of the money they already have to spend to move to more sustainable energy, the historically high energy bills and the increased prices for raw materials”.

But delaying environmental legislation is not a good look when the EU is simultaneously calling on countries to respect the Paris climate goal of keeping global warming below 1.5 degrees Celsius by 2100.

Jacob Werksman, head of the EU’s COP27 delegation, told journalists in Sharm el-Sheikh yesterday that EU negotiators were disappointed that other countries had “not come with more persuasive strategies to get to net zero by mid century”.

He also defended what former US vice-president Al Gore condemned on Monday as Europe’s latest “dash for gas” in developing nations, which could leave “the countries of the world facing climate chaos and billions in stranded assets”, Gore said.

Werksman countered that the EU was sensitive to ensuring that all fossil fuel investments were made in parallel to a “path” to renewable energy. The EU was on a “case by case basis looking at ways we can strike that balance”, he said.

Broad brimmed cap

The commission’s much awaited paper on gas price caps is taking shape but it’s not looking good for those who favour a fixed ceiling, according to excerpts of an early draft seen by Europe Express, writes Alice Hancock.

The paper has been drafted in response to repeated requests from member states to see a detailed plan of what the commission previously called a “temporary market correction mechanism” would look like. It argues against a hard ceiling, much to the relief of capitals including Berlin that do not favour such a step.

“An interpretation of the market correction mechanism as a comprehensive hard cap on all TTF [gas benchmark prices] may seriously outweigh the benefits of such an intervention,” the draft says. It could prompt legal risks and threats to security of supply or “reduced incentives to release gas in the storages that was bought at a higher price”, it notes.

It is unclear yet exactly what kind of cap might suit the conditions laid out by member states in the EU council conclusions three weeks ago but the commission convened a meeting of consumer groups and experts on Monday to discuss what it could potentially look like.

Kadri Simson, commissioner for energy, said the commission would present “the key elements of the price correction mechanism” at a meeting of EU ambassadors tomorrow and after that a “full legislative proposal”.

The commission declined to comment on the draft.

Chart du jour: Kherson withdrawal

Russia yesterday ordered its troops to withdraw from the city of Kherson — a defeat that changes the calculus for both sides as the conflict heads into winter.

Duty-free sales, scrapped

Commission president von der Leyen today visits the Moldovan capital, which has been gripped since September by the largest street protests since President Maia Sandu came to power in 2020, writes Raphael Minder in Warsaw.

The protests have been organised by the pro-Russian Șor party, putting the spotlight on party leader Ilan Șor, a Moldovan oligarch who has been strongly supported by Moscow. Șor has sought refuge in Israel while he is the target of an anti-corruption investigation in Moldova and is also on the US sanctions list.

While Șor has been pushing Moldovans to voice their discontent with soaring inflation in one of Europe’s poorest countries, he himself remains one of Moldova’s wealthiest businessmen, with assets ranging from media and a football club to one of the country’s two duty-free businesses, Dufremol.

But last week the Moldovan parliament voted to ban all duty-free activities, which means Dufremol will not get its licence renewed when it expires next month.

Lawmaker Dumitru Alaiba said that he drafted the law to ban duty-free shops because “the duty-free regime is a bizarre anomaly” that was also at odds with the concept of promoting border-free travel.

Alaiba highlighted the extent to which duty-free outlets have proliferated within Moldova (including one shop located within a Chișinău hotel) and become tied to criminal smuggling activities, particularly cigarettes, with official revenues that defy logic. For instance, 2.8mn packs of cigarettes were sold in 2020 at the Chișinău airport duty-free shop, which would amount to 6 packs per passenger who left the airport that year.

Moldova, Alaiba said, “is perhaps setting a world premiere” in terms of guaranteeing that “everyone should pay their taxes”. 

Keeping valuable things within Moldova is a message that seems to have been understood by at least one former EU official, previous European Council president Herman Van Rompuy. In its underground cellars, Moldovan winery Cricova proudly showcases Van Rompuy’s personal collection of bottles.

What to watch today

1. European Commission tables car emissions upgrade, proposals on cyber defence and military mobility

2. Ursula von der Leyen visits Moldova

Notable, Quotable

There are extremely clear European rules which have been accepted by the Italians, who are the biggest beneficiary of a European financial solidarity mechanism

• Franco-Italian tensions: A European charity ship carrying migrants rescued from the Mediterranean has set sail for France after Italy’s new rightwing government refused to allow the vessel to dock, drawing fierce criticism from Paris.

• Blocking China: Germany has blocked another Chinese acquisition of a domestic semiconductor company, in a further sign of the government’s tougher approach to protecting its high-tech sector.