SOTEU: What to expect from a greener and more digital Europe
On 15 September, European Commission President Ursula von der Leyen delivered her second ‘State of the Union 2021’ address during the plenary session of the European Parliament in Strasbourg.
In her speech, President von der Leyen focused on the main achievements of the Commission over the last year, addressing the impact of the COVID-19 pandemic together with a list of ambitious goals to re-launch the Union’s economy, focusing on digitalization and decarbonization. The Commission aims to close the climate finance gap, calling on global partners like the US and China to take serious commitments. Among the Commission’s priorities, von der Leyen referred specifically to the ambition of the block decreasing CO2 emissions by at least 55% by 2030. She stressed that Europe cannot act alone stating that “the COP26 in Glasgow will be a moment of truth for the global community.” In this light, the President said that the EU would propose an additional €4 billion in climate financing until 2027.
Furthermore, President von der Leyen announced a new connectivity strategy called Global Gateway partnerships, which would enhance investments in quality infrastructure, connecting goods, people and services around the world.
“We want to create links – and not dependencies!”
In the same vein, von der Leyen emphasized the importance of the European strategy to boost the digital transformation and match the digital 2030 goals, stating that “digital is the make-or-break issue […] So this is not just a matter of our competitiveness. This is also a matter of tech sovereignty. So, let’s put all of our focus on it.”
As part of the digital agenda, she announced two new initiatives to be published in the upcoming months. Firstly, the new European Chips Act, which aims to create new markets for ground-breaking European tech. Secondly, the European Cyber Resilience Act with the goal to enhance the capability to address cyber threats. Also, President von der Leyen announced further investments in digital infrastructures, like the expansion of 5G and fibre as well as boosting digital skills.
These initiatives are all aimed at protecting the future of the young generation, therefore, President von der Leyen declared 2022 to be the Year of the European Youth. In this context, the Commission will put in place a new program to help young Europeans to find temporary jobs in other EU countries, called ALMA.
Overall, President von der Leyen was confident about the future of the EU when facing all the challenges ahead.
After the State of the European Union, Members of the European Parliament (MEPs) reacted to the Commission President’s speech. Manfred Weber, President of the European People’s Party (EPP) welcomed the Commission’s plan to boost the European economy and to invest in particular in new opportunities, like sustainable mobility that would create new jobs. In this light, he said that close cooperation with the United States was key and proposed to establish an EU-US trade emergency program.
On the other hand, the Socialists & Democrats (S&D) were more critical and called, together with the Greens/EFA, for further ambition on the climate strategy and biodiversity legislation. The Greens/EFA went even further criticizing the Commission for taking only half measures and stressed that achieving the Green Deal goals was at stake.
On 19 October, the Commission will present its work program for 2022 outlining upcoming priorities and both legislative as well as non-legislative proposals.
Fit for 55 package: carbon pricing in the transport sector
The European Green Deal aspires to reduce the transport sector’s dependence on fossil fuels. In that context, the Commission presented the ‘Fit for 55 Package’ on 14 July 2021. This legislative package aligns the EU’s legislation with the 55% emission reduction target to be achieved by 2030. In order for the transport industry to play its part, the EU is increasing its efforts to put a price on CO2 emissions. Dr2 Consultants will demystify the Commission’s greening efforts within the ‘Fit for 55 Package’ through three illustrative examples of increased carbon pricing across different transport modalities.
1. Eurovignette and CO2 emission standards to decarbonize road transport
The use of road infrastructure by heavy-duty vehicles is regulated through the Eurovignette Directive. The revision of this file, first tabled in 2017 by the Commission, has entered the final stages of the decision-making procedure, and is not part of the Fit for 55 Package. The co-legislators reached in June an agreement on the revision. According to the agreement, time-based road charges will be phased out for heavy-duty vehicles on the core TEN-T network (main routes where most international transit of commercial vehicles takes place). Additionally, the revision grants Member States the possibility to set up combined charging system for heavy-duty vehicles, based on both time-based and distanced-based elements, in order to allow full implementation of the user-pays and polluter-pays principles.
The decarbonization of heavy-duty road transport will also be further incentivized by the introduction of a new system of varying road charges based on CO2 emissions.
With regards to passenger cars and light-duty vehicles, which are responsible for 75% of EU road transport CO2 emissions, the EU tabled as part of the Fit for 55 package the revision of the Regulation setting CO2 emission performance standards for cars and vans. The CO2 reduction target for cars, currently set at 15% for 2025 and 37,5% for 2030 compared to 2021 levels, have been raised in order to ensure that all cars registered as of 2035 will be zero-emission. The new targets require average emissions of new cars to come down by 55% from 2030 and 100% from 2035, compared to 2021 levels. This implies that the European Commission sees no future for the internal combustion engine in the future of the European transport sector.
Considering both aforementioned proposals, Dr2 Consultants expects that the various Fit for 55 carbon pricing measures in the road transport sector will stimulate the market demand for zero- and low emission vehicles, both for passenger as well as freight transport.
2. Extending the EU ETS to the maritime sector
The EU Emissions Trading System (EU ETS), the EU’s instrument to measure and price carbon emissions per unit, is also being revised as part of the Fit for 55 Package. The revised proposal does not only increase its ambition to reduce the number of EU-wide annual allowances at a quicker pace (which will significantly drive up the price for CO2 per ton by cutting supply of emissions permits), but it also extends its scope towards other sectors, including emissions from maritime transport. As a reasoning behind the inclusion of maritime transport in the EU ETS, the European Commission states that maritime transport emissions are currently higher than in 1990 and these are expected to grow further in a business-as-usual scenario.
The extension of the EU ETS to maritime transport applies in respect of emissions from incoming voyages (i.e. emissions from ships arriving at an EU port from a port outside the EU, as well as intra-EU voyages) and emissions occurring at berth in an EU port. The revision plans for the obligation to surrender allowances is to be gradually phased-in over the period between 2023 to 2025.
Investments to support the decarbonization of the maritime transport sector will be supported by the Innovation Fund.
The inclusion of maritime emissions in the scope of the EU ETS, and especially the determination of which emissions are covered (intra-EU voyages, emissions at berth in EU ports, as well as ships arriving at an EU port with their last port of call being outside the EU) risk impacting the competitiveness of the EU maritime transport at global level.
3. Revising energy taxation: end fossil fuel subsidies and incentivize green alternatives
The Energy Taxation Directive (ETD) sets the rules for the taxation of energy products such as motor fuels or electricity. The Commission also proposed a revision as part of the Fit for 55 Package in order to align the taxation of energy products with EU energy and climate policies and end outdated tax exemptions and incentives for the use of fossil fuels, for example the exemption for fuels in the aviation and maritime transport sectors.
Ending tax exemptions for aviation kerosene would result in higher tax burdens, thereby incentivizing the transition towards a higher uptake of sustainable aviation fuels. The revision of the ETD is welcomed by the railway sector, as ending tax exemptions for polluting fuels would accelerate the modal shift, level the playing field between the different modes of transport, and encourage consumers to choose clean alternatives such as rail transport.
Is your business Fit for 55?
The Fit for 55 Package will shape the legislative landscape for the upcoming decade, trigger the public debate and impact businesses across the different transport modalities. The revised and updated CO2 emission standards might radically impact your day-to-day business operations. More than ever, making your voice heard is crucial.
Over the last years, Dr2 Consultants has built up a track record in advising a broad range of transport clients in navigating the EU ecosystem. Would you like to know more about what the ‘Fit for 55 Package’ means for your organization? Feel free to reach out to us or visit our Fit for 55 webpage.
You can also sign up for our weekly Fit for 55 policy updateshere.
Marcel Borger, founder and CEO of OrangeGas, shares OrangeGas’ views on the Fit for 55 package
On 14 July 2021, the European Commission presented the Fit for 55 package, which contains numerous legislative proposals aiming to make the European mobility and energy sector fit for a 55% emissions reduction by 2030. In order to outline the exact impact of the package, Dr2 Consultants asked Marcel Borger, founder and CEO of OrangeGas, exactly what the new package means for his business. As a clean fuels and energy supplier, OrangeGas finds itself right in the midst of the proposed policy measures.
Below you can read more about how OrangeGas has prepared for the publication of the Fit for 55 package, how it views the proposed legislations and how the package will likely impact OrangeGas.
If you have any questions about the potential impact of the Fit for 55 package on your organization, do not hesitate to reach out to Dr2 Consultants.
When did you first hear about the Fit for 55 package?
We were aware of upcoming legislation relevant to OrangeGas quite early on, such as the revision of the CO2 emission performance standards for cars and vans, but we were not aware that this initiative was part of the Fit for 55 package. We recognized the importance of the upcoming legislation, but we realized we had too little knowledge about it. That is why we hired a new employee focusing on Public Affairs. She mapped out the upcoming legislation and as such we became familiar with the Fit for 55 package in early 2021.
The package contains a lot of legislation: which elements are most relevant to OrangeGas?
OrangeGas supports the EU’s ambition to become the first climate-neutral continent by 2050. Our philosophy is to tackle the energy transition with an open and integrated approach. That is why we offer a total package of clean energy carriers for road transport. We are of the opinion that the European Commission is making a serious mistake by solely focusing on electric and hydrogen vehicles and neglecting the potential of biomethane as a green fuel. Biomethane is the cleanest energy carrier available in the market today.
There are three initiatives most important to us: the revision of the CO2 emission performance standards for cars and vans, the revision of the Renewable Energy Directive (RED3) and the Alternative Fuels Infrastructure Regulation (AFIR). Moreover, two other important initiatives are the revision of the Energy Taxation Directive (ETD) and the extension of the EU Emissions Trading System (EU ETS) to road transport.
The proposed legislation determines which technologies and energy carriers will be used for road transport in the future. With regards to the boosted CO2 emission performance standards for cars and vans: the Commission proposes to ban the internal combustion engine by 2035. The internal combustion engine is seen as the problem, while the problem is actually the fossil fuels. For us, it is important that – in addition to electric vehicles – internal combustion engine vehicles continue to operate so that they can run on clean, non-fossil, affordable energy carriers such as biomethane. Biomethane is 100% non-fossil and produced from waste streams such as sludge, manure, and household waste. According to OrangeGas, there should be a mechanism in place to account for the contribution of net-zero fuels, such as biomethane.
How do you assess the impact of the relevant Fit for 55 elements? Which threats and opportunities were you able to identify?
We support the goal of climate-neutral road transport by 2035. However, reaching this goal is only possible if all green technologies are embraced and if emissions are based on a well-to-wheel approach. The newly proposed CO2 emission performance standards for cars and vans solely focuses on electric and hydrogen passenger vehicles. With this, we expect that CO2 emission reduction will be lower than wished for in the coming years, because solely electric vehicles will not be able to meet the market demands of the European society.
As OrangeGas, we think the Commission is overlooking an important transition fuel. Vehicles running on biomethane reduce CO2 emissions by at least 90% (compared to gasoline), the needed infrastructure is in place with over 4,000 refueling stations in Europe and it is affordable for all European citizens. This means we can start reducing CO2 emissions already today! Moreover, even if the international combustion engine is banned by 2035, vehicles with internal combustion engines will be driving around for the coming 30 years or so. We think those vehicles should be fueled with biomethane instead of fossil fuels.
We see opportunities once the proposed legislation is based on a well-to-wheel approach in calculating greenhouse gas emissions of energy carriers in the road transport sector. Legislation should be based on a net-zero approach, instead of a tailpipe-emission approach. As such, counting CO2 emissions along the entire chain is the only fair and just method. OrangeGas offers a total package of clean energy carriers for road transport: electricity, hydrogen, and biomethane. Since all Member States have to make their vehicle fleets more sustainable, and since we offer all sustainable energy carriers, we will continue to be a big market player in Europe. This is definitely the case since biomethane byproducts also serve to support the production of electric fuel cells and other (bio)fuels and therefore also support the transition towards electrification.
How do you prepare, as an organization, for the impact of this new legislation?
The vision of OrangeGas is to realize affordable and sustainable road transport for everyone. This vision will not change. We will continue investing in green fuel infrastructure. Meanwhile, we will keep promoting biomethane and informing citizens and policymakers about today’s cleanest fuel: biomethane.
Do you have any advice for other organizations or companies which might also see threats and/or opportunities in the Fit for 55 package and the European Green Deal ambitions of the European institutions?
“Have guts, work together, and prove them wrong.”
We think it is very important to work together, to create a broad and strong coalition of stakeholders. With such a coalition, you (1) combine knowledge, strengths, and assets, and (2) proclaim one message rather than fragmented messages.
More specific, we think there are four elements that are of great importance: expertise, information, visibility and evidence. You need expertise on the topic itself (in this case biomethane) and on the EU decision-making processes. In order to have the right expertise on the EU procedures, we hired an employee working on Public Affairs and we are supported by Dr2 Consultants. Their support makes a significant difference in getting our message across. Secondly, it is of importance to informand educate policymakers. Often, they have too little knowledge on, in our case, biomethane. Therefore, we publish position papers, produce videos, and organize dialogues. Thirdly, you have to make sure your product is seen and known to citizens. The better your product is known, the bigger influence it will have on society and policymakers’ decision-making. Finally, while Public Affairs activities are crucial, you cannot forget to keep your core business running, which is the living proof of your business model’s success.
For more information about the Fit for 55 package, read our latest policy updates on this webpage and sign up here to receive them directly in your inbox.
Starting on 1 July, Slovenia will take over the rotating Presidency of the Council of the EU for the next six months. The slogan of the Slovenian Presidency, “Together. Resilient. Europe.”, refers to the recovery of the European economy following the COVID-19 pandemic. With the transport industry being one of the hardest hit sectors by the COVID-19 pandemic, the Slovenian Presidency will play an important role in shaping a resilient and future-proof transport sector. In this blog post, Dr2 Consultants has identified three key transport priorities of the Slovenian Presidency for the coming semester.
Moreover, in the coming months, the Slovenian Presidency will lead crucial files through the institutional negotiations and will be closely involved in the discussions of the Commission’s legislative proposals that are part of the ‘Fit for 55’ package.
In the run up to Slovenia’s six-month Presidency, Dr2 Consultants’ transport practice organized a webinar together with Ms. Petra Zaletel, Transport Counsellor at the Permanent Representation of the Republic of Slovenia to the EU, to hear more about the Presidency’s transport priorities in the coming semester. You can watch the recording of the event here.
Coordinating legislative files stemming from the ‘Fit for 55’ package
On 14 July, the European Commission will publish the ‘Fit for 55’ legislative package, which will aim at aligning the EU’s climate and energy legislative framework with the European Green Deal’s target of at least 55% emissions reduction by 2030. This landmark package, covering 11 legislative proposals, is expected to set the prerequisites for the transition towards a 55% emissions reduction by 2030.
The ‘Fit for 55’ package will have both direct and indirect impact on the transport industry, for example:
The revision of the Energy Taxation Directive will put a higher tax rate on fossil fuels to accelerate the production and use of low-carbon and clean alternatives.
The revision of the Alternative Fuels Infrastructure Directive will set binding targets for the deployment of re-charging and re-fueling infrastructure across the EU.
The upgrade of the Renewable Energy Directive will increase the sub-target for the renewable energy share in the transport sector.
As part of its transport priorities, the Slovenian Presidency will be tasked to lead the discussions on these legislative files through the different Council configurations. A milestone event will be a joint informal ministerial meeting of transport and energy ministers on 21-23 September dedicated to common challenges of e-mobility. In a separate meeting, the transport ministers will look into issues related to alternative fuels infrastructure.
The Slovenian Presidency will have to find a balance between diverging interests among EU Member States. During the last European Council meeting on 24-25 May, Eastern EU Member States already voiced their concerns about Europe’s poorest inhabitants having to carry the burden of the EU’s climate ambitions. We expect these discussions to continue in the various Council configurations. The results of these discussions and any adopted conclusions under the leadership of the Slovenian Presidency will also be relevant in the run up to the UN Climate Change Conference (COP26) in November.
Dr2 Consultants supportS organizations in the transition towards climate neutrality by offering tailor-made solutions to navigate the evolving policy environment at EU level and anticipate the impact of the ‘Fit for 55’ package on your organization. Make sure to check out our ‘Fit for 55’ services.
Putting rail transport in the limelight
The European Commission declared 2021 the European Year of Rail. Although the Portuguese Presidency has officially launched the Year of Rail during the informal Transport Council meeting in late March, the promotional activities have seen a slow start due to the extended travel restrictions. But now that the COVID-19 situation is rapidly improving and travelling across Europe will be possible again in the coming months, the Slovenians will have more opportunities to promote rail as a sustainable mode of transport and further build upon the recently adopted Council conclusions on “Putting rail at the forefront of smart and sustainable mobility”.
As of September, the Connecting Europe Express will visit almost all Member States across Europe, with festivities and stakeholder events on several locations, including Brussels, Ljubljana and Berlin. In addition, in November this year, the European Commission is expected to table a package of legislative and non-legislative initiatives (e.g. revision of the TEN-T Regulation, revision of the Intelligent Transport Systems Directive, Action Plan to boost rail passenger transport) that will impact several components of the railway industry, including infrastructure, ticketing tools, and cross-border passenger services.
These legislative files are expected to dominate the policy discussions in the coming years. Would you like to better understand how these files will impact your business operations? Do not hesitate to get in touch with our Transport Team.
Concluding negotiations on inherited files
In addition to dealing with new legislative proposals, the Slovenian Presidency will also inherent files from the Portuguese Presidency. Although the Portuguese Presidency has been successful in concluding various pieces of legislation relevant for the transport sector, including the controversial new EU-wide road charging rules for light and heavy-duty vehicles (Eurovignette) and the Brexit Adjustment Reserve, several issues still require further discussions.
Regarding transport priorities of the Slovenian Presidency, we expect the Slovenians to start Trilogue negotiations on the Hired Vehicles Directive as well as the Single European Sky (SES2+) initiative with the aim to achieve a breakthrough on both files by December 2021 at the latest.
How can Dr2 Consultants’ transport practice support you?
Do you need support in understanding and anticipating upcoming transport files? Do not hesitate to get in touch with us. Dr2 Consultants has built up a track record in advising a broad range of transport clients in navigating the EU ecosystem.
Dr2 Consultants Brussels welcomes Jeroen Lammers as Associate Partner
Dr2 Consultants is pleased to announce that Jeroen Lammers of Dr2 Consultants Copenhagen will from now on also share his international experience and network as associate partner of the Dr2 Consultants team in Brussels.
Jeroen has a wealth of experience in public affairs in the EU, the OECD, the Netherlands and Denmark in a wide range of policy issues such as taxation, corporate governance, sustainability, innovation and international trade.
Currently, Jeroen manages the Dr2 Consultants’ Copenhagen office in Denmark. He focuses on the policy areas of taxation, sustainability and digitalization and helps organizations with research-based impact assessments and public affairs strategies. He is also a lecturer at the Copenhagen Business School in international corporate tax law. Until 2019 Jeroen was Director Economic Policy at the Dutch business confederations VNO-NCW and MKB-Nederland.
The importance of global public affairs is growing, as policy areas and companies extend across borders and become more and more interconnected. The closer cooperation between the Dr2 Consultants’ offices in Brussels and Copenhagen underlines this and contributes to further increasing the impact for the clients of the global Dr2 network with offices in The Hague, Shanghai, New York, Copenhagen and Brussels.
This agenda builds on the current discussions on tax policy at the Organization for Economic Cooperation and Development (OECD) level, but also goes a lot further. The Commission announced no less than seven new legislative proposals that will have a big impact on companies that are active in the EU, especially with regards to compliance requirements. Most of these proposals are expected to be published in the second half of 2021. In this blog post, Dr2 Consultants will provide you with an overview of the most relevant initiatives of the communication and will highlight how they will impact your business.
EU Digital Levy
On 14 July 2021, the Commission will publish its proposal for a European Digital Levy. There are indications that the Commission will propose a 0.3 to 0.5% tax on turnover from digital services that are provided by companies with a turnover of €250 million. The EU Digital Levy could therefore impact a lot more businesses than only the U.S. big tech companies. It is therefore likely that the proposal will affect tax compliance costs, tax revenues and the competitiveness of EU digital companies, and ultimately consumers. Read more on this topic here.
Directives following the OECD discussions on business taxation
Since 2019, the OECD has been discussing how to address the tax challenges of the digitalization of the economy (Pillar 1) and how to combat tax avoidance through a global minimum tax (Pillar 2). The G7 finance ministers agreed on 5 June 2021 that market jurisdictions should get a bigger share of the corporate income tax revenue and that there should be a global minimum tax rate of 15%. This deal in the G7 brings the agreement in the G20/OECD discussions on tax reform much closer. It is expected that a high-level political agreement in the G20/OECD could already be achieved in the beginning of July 2021, thus clarifying the details of the agreement during the Indonesia Presidency of the G20 in 2022.
Directly following this agreement in June 2021, the Commission will publish (consultations on) proposals for two new directives to ensure uniform implementation of the OECD proposals in the EU. Even though there might be push back from some Member States with regards to a minimum tax rate of 15%, it is likely that these proposed directives will be adopted quickly. These proposals will lead to higher compliance costs as the impacted companies will have to calculate if and which portion of their profits should be taxable where their customers are located.
Fighting tax avoidance (ATAD 3)
To further support its work on business taxation, in Q4 of 2021 the Commission will present a proposal to prevent the misuse of companies with very little substance and without real economic activity (so-called shell companies). By means of this proposal, EU companies will be subject to new compliance requirements, as this will lead to more reporting to the tax administration on the presence of real economic activity in companies in the corporate structure. Particularly with regards to intermediary holdings this proposal could mean much higher reporting requirements to safeguard access to the benefits of tax treaties.
The Commission will also present a proposal in Q4 that will limit the deduction of royalty and interest payments to companies that are located outside of the EU. The aim is to prevent that these types of payments are used to avoid paying tax in the EU. The consequence of these proposals, however, is that much more information will have to be provided to the tax authorities with regards to these payments to safeguard deduction where there are valid business reasons.
Increasing transparency in business taxation
In the first half of 2022, the Commission will publish a proposal for a directive that requires big companies to publish the effective tax rate they pay over their profits. It is likely that these effective tax rates will need to be published on a country-by-country basis. In addition, it is still unclear if this requirement will only apply to companies with a worldwide turnover of more than €750 million (following from the G20/OECD discussions) or that the EU would put the revenue threshold on €250 million, as they plan to do with the Digital Levy.
Encouraging equity over debt financing
In Q1 of 2022, a proposal for a directive is expected that will make it more attractive to finance investments with equity in order to discourage that companies take on too much debt. The proposal most likely will involve an allowance for equity (ACE). However, the possibility to deduct a percentage of (the mutation of) a company’s equity also comes with new reporting requirements. For instance, it would make it necessary to perform all sorts of corrections to the fiscal equity as it shows on the balance sheet to ensure that the equity cannot be artificially inflated to increase the deduction.
A new framework for business taxation
Finally, the Commission announced a new framework for business taxation in the EU to be published in 2023. The “Business in Europe: Framework for Income Taxation” (BEFIT) will build on the existing proposal for Common Consolidated Corporate Tax Base (CCCTB) that has been pending since 2011. If adopted, BEFIT will make it possible for companies to file their tax assessment for all their EU activities in one Member State. This one-stop-shop approach should mean a reduction in the administrative burden that companies now have to deal with when filing separate tax assessments in all the Member States where they are active. The experience with the CCCTB so far, however, shows that it is not easy for all the Member States to quickly align on this proposal.
What can Dr2 Consultants do for you?
Dr2 Consultants continuously monitors the developments of the discussion on the new global, EU and national tax regimes, so we can help you keep well-apprised of the relevant developments in the coming months. Should you be interested in further information on any of the EU Commission’s business taxation proposals and how these could specifically impact your business, you can reach out to Dr2 Consultants at firstname.lastname@example.org or find more information on our website. Also, find out how our monitoring services can help your business here.
Transport sector and national recovery plans: investment priorities for a green recovery
On 30 April, most EU Member States handed in their national recovery and resilience plan in the framework of the Recovery and Resilience Facility (RRF), the EU recovery fund of €750 billion aimed to finance the (green) recovery from the COVID-19 pandemic. The European Commission has currently received 18 national plans. Whereas larger Member States like Germany, France, Spain and Italy already handed in their plans, it remains to be seen what Member States such as the Netherlands, Sweden and Finland will prioritize during the recovery phase. Dr2 Consultants’ Transport Team assessed the different national recovery plans focusing on the transport sector to identify Member States’ investment priorities for the coming years and identified three investment trends: charging infrastructure, railways and hydrogen solutions. These trends will provide ample opportunity for the transport industry to secure funding for their projects, and are therefore relevant to monitor closely.
Below, Dr2 consultants provides a more detailed explanation of the three identified trends.
Trend 1: Charging infrastructure to stimulate the greening of transport as part of national recovery plans
Multiple Member States aim to use RRF resources to invest in the roll-out of recharging and refueling infrastructure for alternative fuels such as electricity, hydrogen and bio-CNG/LNG. Where Austria, Belgium and Spain invest in the deployment of recharging infrastructure, Germany is leading the pack, as it will invest approximately €2.5 billion in the infrastructure for electric vehicles. This recharging infrastructure will take the form of an increase in the number of charging points for electric vehicles, both rolling out public charging points as well as stimulating public and private investments in infrastructure rollout by private companies. These investments in alternative fuels infrastructure will go hand in hand with stimulating fleet renewal throughout the EU, focusing on vehicle fleet for company cars and trucking businesses.
Not only are these investments directly stimulating the greening of the transport sector, but they are also desirable in the context of the upcoming revisions of the Alternative Fuels Infrastructure Directive (AFID) and the TEN-T Regulation. In line with the anticipated objectives set out in these upcoming legislative files, Member States will be required to invest more in the deployment of recharging infrastructure to boost e-mobility across the EU.
Trend 2: Expanding railway connections finds resonance in the national recovery plans for transport
The European ‘Year of Rail’ appears to find resonance in the national recovery plans. A swift modal shift from road to rail could become reality as Member States are consistently aiming to invest significant amounts from the RRF into the expansion of the railway network in the EU. Italy aims to invest an approximate €25 billion in railway infrastructure, which is partly used for high-speed lines in its northern parts, focusing on cross-border connections with the rest of Europe. Belgium will also be ambitious in the coming years, focusing both on a more efficient rail network to further stimulate a modal shift, as well as embracing new mobility concepts such as Mobility as a Service (MaaS) and building accessible multimodal stations.
Trend 3: Hydrogen solutions for transport
With Member States embracing hydrogen as a key enabler of the energy transition, it is no surprise that Member States aim to invest massively in hydrogen solutions. First of all, Member States are scaling up the production, storage and transmission of (green) hydrogen. Several Member States state they want to start Important Projects of Common European Interest (IPCEI) in the field of hydrogen. This means that Member States are not individually scaling up in the field of hydrogen, but that the hydrogen transition is considered a collective effort between all Member States. This way of thinking is in line with the EU’s Hydrogen Strategy from July 2020, and is a trend that will further materialize after revisions of essential pieces of EU legislation in the Fit for 55 Package.
Dr2 Consultants observes that an important element in national hydrogen strategies are the transport applications of hydrogen. Portugal, for example, aims for a 1-5% share of green hydrogen in road transport and a share of 3-5% in inland waterway transport by 2030. Germany and France are both set to invest approximately €2 billion in the scale-up of their hydrogen economy.
What does this mean for European businesses?
The existing plans can serve as a good blueprint for lobbying activities towards Member States that are still in the process of writing and finalizing national recovery and resilience plans. The projects and investments as laid out in the existing plans can be an important driver for the Member States to invest in similar projects in order to boost their competitive position.
However, Dr2 Consultants sees that some plans are more detailed than others, and that some Member States have fewer concrete ideas yet on how to reach some of the goals they pose in their plans (e.g. sticking to general notions such as ‘stimulating the modal shift’). Since the recovery plans will be scrutinized by the European Commission, it will remain to be seen if the national plans will have to be further specified before they can be approved by the EU.
Dr2 Consultants advises businesses to consult closely with national authorities how they can contribute to the execution of projects. Although RRF resources will have to be allocated to projects that can stimulate the (green) recovery over the short-term, co-financing from the RRF can cover unprofitable margins and ensure investment clarity.
Dr2 Consultants appoints Viktoria Vajnai as new Partner and launches new services on the ‘Fit for 55 Package’
Dr2 Consultants is pleased to announce Viktoria Vajnai as new Partner. Viktoria has been a member of the Dr2 Consultants’ office in Brussels and has fifteen years of experience in EU Public Affairs specialised in transport and sustainability.
“We are excited to welcome Viktoria in our management. She has been actively contributing to the shaping of our company both as a senior consultant and as a junior partner for the past years and we look forward to further building on our international team and successful services” said Margreet Lommerts and Jasper Nagtegaal, Managing Partners.
Today, Dr2 Consultants is also launching its ‘Fit for 55’ services that will provide companies with targeted solutions on the European Commission’s ambitious plan to reduce carbon emissions by 55% by 2030. Among others, Dr2 Consultants will offer a Fit for 55 Impact Scan, tailor its public affairs activities around the European Commission’s initiative and will organize a dedicated training that will help interested parties understand the impact of the legislative proposals on their businesses.
Digital Services Act proposal: the start of a new era in digital regulation
On 15 December, the European Commission published proposals for Regulations on the Digital Services Act (DSA) and the Digital Markets Act (DMA), with the goal to reform the digital space, creating a comprehensive set of new rules for all digital services, including social media, online market places, and other online platforms that operate in the European Union.
The proposed Regulation on a Digital Services Act aims to update the eCommerce Directive (ECD) from the year 2000 as well as introduce new binding, harmonized, EU-wide obligations which will have a significant impact on a wide range of digital services that connect consumers to goods, services and content. This blog post sheds some light on some of the main provisions of the Digital Services Act and their subsequent impact on businesses.
Which companies will be affected by the new Digital Services Act proposal?
The Digital Services Act proposal includes rules for online intermediary services. The obligations of different online players match their role, size and impact in the online ecosystem. Among the regulated groups are intermediary services offering network infrastructure (Internet access providers, domain name registrars), hosting services such as cloud and webhosting services, online platforms bringing together sellers and consumers such as online marketplaces, app stores, collaborative economy platforms and social media platforms, and very large online platforms. All online intermediaries offering their services in the EU Single Market, whether they are established in the EU or outside, will have to comply with the new rules. Micro and small companies will have obligations proportionate to their ability and size while ensuring they remain accountable.
An asymmetric approach: different obligations for different players
The Digital Services Act will introduce a series of new, harmonized EU-wide obligations for digital services, carefully graduated on the basis of those services’ size and impact. All intermediaries falling under the scope of the DSA will have obligations in terms of transparency and fundamental rights protection and would have to cooperate with national authorities. Additionally, all intermediaries not established in the EU but offering services in the Union will have to designate a legal representative in one of the Member States where the provider offers its services. The absence of general monitoring obligations, already enshrined in the ECD, will remain in place in the Digital Services Act. Additionally, the Commission has introduced a “good Samaritan” principle, under which providers of intermediary services are not excluded from liability exemptions because they carry out voluntary activities to detect and remove illegal content.
For online platforms and hosting services, the proposal includes requirements for more detailed notice & action provisions. The proposal also introduces the concept of trusted flaggers, appointed by Member States authorities, whose notices should be processed with priority. Furthermore, the proposal introduces a “Know your business customer” principle, under which platforms will be required to obtain and verify identification information from the traders prior to allowing them to use their services. Finally, transparency obligations for online advertising will require online platforms to provide their users information on the sources of the ads they see online, including on why an individual has been targeted with a specific advertisement.
Platforms that reach more than 10% of the EU’s population (45 million users) monthly in average will be considered systemic in nature and will be subject to specific obligations to control their own risks. Very large online platforms will have to conduct yearly risk analyses, they will be subject at their own expenses to annual audits, adhere to transparency obligations for recommender systems as well as comply with additional measures for online advertising transparency. Finally, very large online platforms will have to appoint one or more compliance officers responsible for monitoring their compliance with the Digital Services Act Regulation. Member States will have to lay down the rules on penalties applicable to infringements of these rules by providers of intermediary services under their jurisdiction with the maximum not exceeding 6 percent of the annual income or turnover of the intermediary service.
EU countries will be required to appoint a so-called “Digital Services Coordinator” to oversee enforcement of the regulation, which will have powers in terms of investigation, enforcement (including fines) and the imposition of access restrictions. Additionally, the coordinator would have the possibility of cooperating cross-border by requesting another digital service coordinator in a country of establishment to carry out an investigation. An independent advisory group of Digital Services Coordinators named the “European Board for Digital Services” will be established, which will contribute to the guidance and consistent application of the regulation and assist the digital service coordinators. For the case of very large platforms, the Commission will have direct supervision powers and, in the most serious cases, will be able to impose fines of up to 6 percent of the global turnover of a service provider.
What implications could the Digital Services Act proposal have for businesses?
Industry stakeholders’ responses to the proposal are mixed, with overall positive reactions to the extra harmonization measures, and the preservation of the ECD’s core principles. However, many raise concerns about the Act’s compatibility with other existing legislation, such as the Platform-to-Business Regulation and the Omnibus Directive, as well as the way the trusted flaggers’ concept would work in terms of transparency, an issue raised also by consumer protection groups. The inclusion of the requirement for non-EU companies to have a legal representative in the EU, while burdensome for such companies, has so far been accepted positively by European players as it would ensure a level playing field within the Single Market. Relating to the fines, the issue has been raised that the threat of significant fines for non-compliance might lead to preventive removal of content which might otherwise be considered legal, putting companies in the uncomfortable position of risking fines under the Digital Services Act or being criticized for violating freedom of expression by censorship.
Another example of businesses that would be impacted by the new rules are information society services offering a wide range of services such as search engines, cloud services and other platforms. Those businesses generally welcome the fact that the core foundations of the e-Commerce Directive are maintained, i.e. limited liability, no general monitoring obligations and the maintenance of the country of origin principle. However, there will be extra obligations for ‘very large online platforms’, having more than 45 million users across the Union. These platforms will have to provide regulators and outside groups with greater access to internal data, and appoint independent auditors who will determine if these firms are compliant with the new rules. The biggest tech companies will also be forced to provide greater transparency on online advertisements. These extra obligations will require additional resources and also raise a question about the legislative coherence between the Digital Services Act on the one hand, and provisions in for instance the recently published European Democracy Action Plan on the other.
Finally, there have been concerns among Big Tech companies that the criteria for identifying very large platforms need to be clearer and more inclusive, with several accusing the Commission of selection bias. Furthermore, the Digital Services Act is likely to have significant consequences for gig economy companies, such as well-known travel accommodation websites, as the extra requirements against illegal content and the provision of information on users would allow local authorities to require the removal of unregistered properties and receive information on hosts with outstanding tax obligations. City authorities in big European cities such as Amsterdam, Berlin and Paris, had adopted rules against said platforms and the Digital Services Act would allow them to enforce them.
What to expect next in the legislative process?
Following the publication of the Digital Services Act in December, the DSA will likely be the subject of long and arduous discussions in the Council of the EU and in the European Parliament.
Within the European Parliament, on 29 April, the Conference of Presidents, which gathers the leaders of all political groups, reached an agreement on which committee can take the leadership on the Digital Services Act (DSA), Initially, IMCO was assigned the exclusive competence on the legislative file in view of its impact on the Single Market legislation, but LIBE, JURI and ITRE also argued that they should have competence.
After a long-lasting debate, the President of the Conference of Committee Chairs, Mr. Antonio Tajani, proposed a solution. In order to reach a compromise, Tajani proposed to appoint all committees that challenged the leadership to be “associated” with IMCO under rule 57 of the European Parliament. Collaboration will take place through regular meetings between IMCO, ITRE, LIBE and JURI for the DSA proposal, and the rapporteurs of each committee will participate in all shadow meetings, the drafting of the IMCO reports, trilogue sittings and compromise amendments negotiations. All amendments of the associated committees will be voted in IMCO, while the mandate to enter trialogues will be voted in plenary, instead of committee sitting, to allow all associated committees to jointly vote and re-table amendments.
A parliamentary discussion on IMCO Rapporteur MEP Christel Schaldemose’s (Denmark, S&D) draft DSA report is set for 21 June. Within the LIBE Committee, MEP Patrick Breyer (Germany, Greens/EFA) has been appointed rapporteur. Within the JURI Committee, MEP Geoffroy Didier (France, EPP) has been selected as rapporteur.
Council of the EU
As confirmed by the Portuguese Presidency of the Council of the EU, the Digital Services Act is discussed in the Internal Market Working Party, falling within the remit of the Competition Council formation. According to insights into a draft progress report on the DSA from the Portuguese Council Presidency, dated 27 April, there is overall support among the Member States for the ambition of the DSA proposal and the need to swiftly adopt it. A few issues have however been identified as sensitive political and legal issues, such as the need for effective implementation and better coordination between countries, their authorities and the Commission, in particular in terms of cross-border enforcement and the impact on the country-of-origin principle. Questions were also raised on enforcement vis-à-vis service providers established outside of the EU. Further discussion will be needed on the scope, Article 6, Trusted Flaggers, the protection of trade secrets, out-of-court dispute settlements and the application date. The progress report will be presented to COREPER, after which it can be submitted to the Competitiveness Council on 27 May.
In terms of the time frame for adopting the DSA, France has announced a highly ambitious plan to conclude the negotiations for the proposal during its Presidency of the Council of the EU in the first half of 2022. The Commission shares this objective for the co-decision process to be finalized in a year and a half, however, it is useful to remember that other recent and major files, such as the General Data Protection Regulation and the Copyright Reform, took respectively 5 and 2.5 years to be adopted.
Dr2 Consultants closely monitors the developments on this file for its clients. If you would like to know more about the proposal, and how it might impact your business, please contact Dr2 Consultants.
Respecting the deadline of 30 April, Belgium shared its National Plan for Recovery and Resilience with the European Commission. This Belgian national recovery plan fits into the EU’s COVID-19 Recovery and Resilience Facility, which makes €672.5 billion in loans and grants available to support reforms and investments undertaken by Member States. Belgium is entitled to claim around €6 billion in support if the European Commission approves the list of proposed Belgian projects. The Commission expects, for example, that the national recovery plans are in line with the EU’s objectives, i.e. 37% of the investments will be spent on sustainability and 20% on digital transition. However, the Belgian plan is even more ambitious as 57% (€3.4 billion) will be allocated to sustainable projects and 31% to digital transition (€1.85 billion).
The document of almost 700 pages includes 87 investment projects and 34 reform projects, broadly revolving around six axes: sustainability, digital transition, mobility, inclusivity, productivity and public finances. This blog post provides a closer look at the first three axes.
Three axes of the Belgian national recovery plan: sustainability, digital transition, mobility
The green transition
The sustainability axis is divided in three separate components: renovation of buildings, emerging energy technologies and climate and environment. This division already gives an idea of the Belgian priorities relating to sustainability.
Belgium wants to invest more than €1 billion in the renovation and sustainability of public buildings and social housing, which is almost one third of the total investment in sustainability. This is necessary as much of the Belgian building stock is old and among the least efficient in Europe. More than 80% of the building stock is energy inefficient (EPC class C and below), and 50% of the building stock is the worst performing (EPC class E and below). To tackle this challenge the plan indicates that all government levels want to invest in the renovation of public buildings, such as government buildings and schools. This includes investments in insulation measures, joinery and glazing and Green Heat (generation, storage and distribution). Next to that the plan stresses that more efforts must be made concerning the energy renovation of social rental properties. In that context, the Flemish government decided, for example, that by 2050 at the latest existing social rental properties must achieve an equivalent or comparable energy performance level as newly-built homes.
Investments in emerging energy technologies must support the energy transition and system integration to further reduce CO2 emissions. Next to a reform of the fossil fuels tax and investments in the industrial value chain for the hydrogen economy, this includes €450 million for an offshore energy island in the North Sea that should be ready by 2025. The advantages of the energy island are threefold according to the plan. Firstly, it will enable power consumers to make use of a greener energy mix. Secondly, the hub will generate economic activity in both the short and long term. Finally, the hub will position Belgium at the center of the debate on energy hubs in the North Sea. This is interesting for private investment and can result in further interconnectivity, which is important as Belgium has limited space at sea.
The last component of the sustainability axis of the Belgian national recovery plan is climate and environment, which aims to clarify the ambition to conservate and redevelop biodiversity though the sustainable use and restoration of forests, wetlands meandering rivers and grasslands. Wallonia for example wants to establish two new national parks by 2026. This would not only protect the biodiversity but also increases the quality of life and regional economic development, in particular through jobs generated in tourism. With the Blue Deal, Flanders on the other hand wants to anticipate on their structurally low water availability. Therefore, they will invest in large-scale restoration and construction of wetland nature, robust green-blue interconnection in the built environment and in more open space. In addition, €6 million is earmarked for research projects aimed at sustainable water use in the agricultural sector
The digital transition
The digital transition of Belgium will mainly focus on investments in cybersecurity (€80 million), new technologies, including 5G (€100 million), and about €580 million will go to the digitization of the public services.
Based on structural investments and reform projects, the objective of the cybersecurity component is to fight against cyberthreats through projects that strengthen Belgian resilience and capacity to face new cybercrime phenomena. These investments will mainly be carried out by the federal government and include a new national strategy targeting all actors: the general population, private organizations and vital organizations like the Belgian defense. This plan must ensure that Belgium is one of the least vulnerable countries in Europe in terms of cybersecurity by 2025.
Furthermore, 75% of the digital budget will go to investments in digital technologies to make the actions of the public administration more efficient, both in its internal processes and in its interaction with citizens and businesses. For example, €85 million will be earmarked for the digitization of the Justice Department. Next to these investments, this component also aims to increase the simplification of administrative procedures for both citizens and businesses by adapting existing e-government applications to existing standards and developing new applications where necessary.
Lastly, the plan indicates the Belgian ambitions to improve the connectivity of the national territory through the development of fiber-optic networks at very high speed, as well as developing 5G corridors that enable universal and affordable access to connectivity in all urban and rural areas. This component also aims to capitalize on the development of new technologies, such as artificial intelligence (AI), by ensuring that these technologies have a positive societal impact.
Further to the ‘mandatory’ investments in sustainability and digital transition, the Belgian governments decided to also make mobility one of the spearheads of the Belgian national recovery plan. About €1.3 billion will be used for the (re)construction of new pedestrian and cycle paths, the modal shift of transport and greening of vehicles.
All regional governments will try to improve the quality of the bicycle infrastructure. For example, the Schuman square in the European district in Brussels will undergo a significant transformation and will be finalized by 2025. In combination with public transport and car-sharing solutions, investments in bicycle infrastructure are expected to further reduce car ownership and use.
To achieve the desired modal shift in transport, the Belgian governments want to improve public transport services by investing in new or more efficient bus, tram and metro infrastructure and by improving their services. This includes the expansion of the metro and tram network in Charleroi and Liège. At the same time, tax reforms and digital tools, like applications to further develop the Mobility-as-a-Service (MaaS) ecosystem in Brussels will increase the demand for sustainable transport. As far as freight transport is concerned, major works will be funded to support the modal shift from road to water and rail. For example, by raising the bridges over the Albert Canal in Liège it would be possible to allow ships with four layers of containers to sail between Antwerp and Liège.
Finally, greening of vehicles will play an important role in the future of Belgian mobility. To achieve this ambition, the different governments will accelerate the electrification of road transport by increasing the use of electric buses for public transport, accelerating the development of charging infrastructure and establishing a new framework for commercial vehicles. The plan indicates that 80,000 public and private charging points for electric vehicles will be installed by 2026.
Conclusions from the Belgian National Recovery Plan
The National Plan for Recovery and Resilience is a combination of very diverse projects proposed by all government levels. The 87 investment and 34 reform projects are ambitious and they all will play an important role in the economic reconstruction of Belgium in the coming five years. With the financial injection of €5.9 billion from the European Recovery and Resilience Facility, if the European Commission approves the proposed projects, Belgium also wants to outpace the investment backlog compared to other Member States that has emerged since 2000. Therefore, the different governments will also use their own resources to achieve the objectives mentioned in the plan. In addition, as Belgium has one of the most open economies in the world, we can expect that it will also profit from the recovery plans of other Member States.
Dr2 Consultants is at your disposal to assess the National Plan for Recovery and Resilience and identify the impact and opportunities for your business and support you in the outreach towards Belgian stakeholders. Learn more about our Belgian Public Affairs services here.
List of Annexes
Annex 1: Timeline of proposed sustainability projects