Filed under: Fleishman-Hillard Blogs
2015 promises to be a year of change. With elections fast approaching in Finland, the United Kingdom, Portugal, Spain, Poland and Ireland voters seem to want to reject the status quo. While everyone is talking about the Greek debt negotiations and the rise of Podemos in Spain, in the North of Europe, an important election has skipped many people’s radar.
Finland, Europe’s tough fiscal hawk, is likely to face a change of government after Sunday’s election. The change is likely to come about due to a slowing Finnish economy and what Prime Minister Alexander Stubb called a “lost decade” with recession entering into its third consecutive year, unemployment growing and competitiveness declining. Thus similar to other struggling economies in Europe, Finland is experiencing economic hardships which in the eyes of nearly all parties can only be resolved through harsh labour market reforms and fiscal austerity. In contrast, however, to the trend in the South where such policies led to public discontent and a steep increase in popular support for anti-EU parties, Finland is experiencing a revival of the established parties, while the Finnish anti-EU party, the Finns, however, is falling behind their landslide successes from the previous election in 2011.
Will they vote for anti-establishment?
Watch out – The Finns are coming…
Despite the decline in popularity of his anti-establishment party, Timo Soini, the Finn´s leader, might well end up on top as the winner of the Finnish election-dilemma as part of a coalition in a government led by the Central Party. To be more specific, in the event of an “equal” split of votes between the four largest parties (all four are polled to receive around 15%-25% of the votes), a coalition of three will need to be formed. While, the current governing parties have already turned down the idea of working together again, that would leave the Finns as the most likely alternative to become the third partner in a Central Party-led government.
Mr Juha Sipilä, the Central Party’s leader and likely to become Finland’s new Prime Minister currently leading with 24.9% of the votes, is not opposed to the idea so long as its partners agree with his political agenda. Not to mention that the current Prime Minister Alexander Stubb has reiterated that the Finns are much better than the reputation preceding them abroad, showing that he would also be open to support them as a coalition partner. As a result, anti-EU forces might find themselves in the Finnish government, despite the fact that voters are rallying around the established parties and support for reactionary parties is fading.
The Finn’s leader Timo Soini
… to Europe!
A coalition including the Central Party and the Finns is expected to be less pro-European as the current government. Mr Sipilä, though successful in business, is not renowned for his international experience and although his party might consider itself pro-European difficult compromises will need to be made with the Finns, who are opposing new bailout programmes, the Euro and further deepening of European relations.
In Brussels the event of a coalition between the Central Party, the conservative National Coalition Party and the Finns will mainly impact Finland’s position and negotiation leeway in the Council. Mr Sipilä’s hands in negotiations will be more tied than Mr Stubb’s or Mr Katainen’s have been. On the one hand he would have to demonstrate his support for a deeper EU to its European partners – to whom Finland will grow more and more economically dependent the longer sanctions against Russia prevail. On the other, he would have to reassure his coalition partner Finland is maintaining high levels of sovereignty and remaining critical towards the Eurozone. In particular on the latter, however, Mr Sipilä demonstrate strength by continuing to back strict rules and austerity measures – policies that all Finnish parties support both for their own country and for Europe. Finland is therefore expected to remain “Europe’s fiscal hawk”. Moreover more than before Finland will be likely to defend EU disintegration positions and align itself to the UK defending sovereign interest and the principle of subsidiarity.
Anglo-Finnish cooperation is already well established in the European Parliament, where the Finns have joined the British-led European Conservatives and Reformists Group demonstrating a conservative yet mainstream political agenda. As the elections are likely to make Prime Minister Stubb’s party a junior coalition partner, we neither expect that the outcome will neither affect the focus of the National Coalition as part of the EPP nor workings of the Finnish Vice-President of the Commission Jyrki Katainen nor drastically change the focus of his political agenda in Europe.
All in all, the Finnish elections may not change the tone in Brussels tremendously on their own, but they will provide insights on how anti-establishment parties are likely to affect national politics and therefore affect London’s, Copenhagen’s, Berlin’s and Madrid’s positioning in Brussels.
Is Europe Finnish(ed)?
The Finnish “case study” is helpful in understanding and dealing with the fast growing support for anti-establishment movements across the Continent. In the North, Sweden, Denmark and Norway are watching closely as growing support for their respective populist parties is making it harder for their mainstream parties to continue ignoring them. While Norway is currently being led by a coalition of conservatives and the populist Progress party, the Sweden Democrats came third in the September 2014 elections in Sweden and Denmark’s Danish People’s Party is gaining influence and support before the upcoming elections in autumn.
In the Centre of Europe, the Finns’ positioning and agenda seem familiar to a still domestically unwelcome anti-Euro party in Germany, the Alternative für Deutschland (AfD). Bernd Lucke, the party’s leader, will eye developments in the North closely to assess whether the Finnish outcome might be a valuable example on how he could achieve his power aspirations in Germany.
In the South, Spain is also experiencing a similar trend with new anti-establishment parties, even though its popularity appears to be fading the closer we get to parliamentary elections in December. Podemos could grasp a large part of the votes, leaving no party with a majority to form a government.
Although anti-establishment parties are experiencing a slow in their popularity across Europe, all eyes will remain on them. The success of Podemos, Syriza, the Finns, the UK Independence Party and others will furthermore force the establishment to make concessions and re-orientate their position on a great variety of issues such as European integration, social, economic and fiscal policies.
While the traditional separation of power between centre-right and centre-left parties will continue to dominate Europe, anti-establishment parties are likely to make this election year way more thrilling and unpredictable than previous ones. Let’s see what happens!
We will keep you up-to-date with all our coverage of this election year with upcoming analysis of the UK and the consequences of a possible Brexit as well as following the election developments in Denmark, Portugal, Poland and Spain.
Martin Bresson, Joachim Wilcke, Ilektra Tsakalidou
April 17, 2015
Europe’s Judgement Day came on Monday, when Member State representatives, international health officials and medical experts met at The High Level Conference on Healthy Lifestyles held to discuss the state of childhood obesity in Europe. Are our children’s waistlines getting larger? Are existing initiatives helping us get healthy? What more do we need to do?
As in all conferences, papers and discussions about obesity, no clear cut answers were provided. While International Organization such as the WHO, OECD and EU Commission pointed to overwhelming amounts of data indicating the gravity of the obesity pandemic, Member States provided a number of enlightening examples of good practice, both at national and local level.
So how well are we actually doing?
The Commission and World Health Organization were fairly fatalistic.
John F. Ryan, a veteran of EU health policy and Director of the Public Health division at DGSANTE, noted that chronic diseases are responsible for 80% of deaths in Europe, hampering social cohesion and economic growth, despite being easily preventable. He called on the food and drink industry, NGOs, governments, parents and schools to help reduce childhood obesity by ensuring access to balanced and healthy meals and helping children engage in regular physical activity.
Dr Gauden Galea (Director of the Division of Noncommunicable Diseases of the WHO) used similar language to explain the importance of creating healthy food and drink environments in schools, as well as incorporating more physical activity in the curricula and funding infrastructure for this to occur.
But is it all doom and gloom?
Member states portrayed the situation in a more positive light. Latvia, Estonia and Hungary presented their own projects to ensure free, healthy meals in schools. The common denominator was the setting of national standards which list a number of allowed or required products in school meals such as fruit and vegetables, while excluding all confectionary and sugary or fatty foods. Under regulation 610, the government of Latvia also restricted the marketing and distribution of salty snacks and sugary drinks in schools – bringing a 10% reduction in consumption. For more examples on the Estonian and Hungarian models, you can watch the presentations here.
And how significant are these initiatives?
The national food schemes presented at the conference seemed extremely similar to the prescriptions laid out in the WHO European Food and Nutrition Action Plan launched in 2014, which demands 4 (or in truth, 5) key policy changes:
- Implementing mandatory standards for school meals
- Providing nutritional education in schools
- Offering free fruit and vegetable schemes
- Imposing strong controls on the marketing of food and non-alcoholic beverages in schools
- …as well as adopting initiative for physical activity.
Yet international organizations were all but satisfied. Dr Joao Breda of the WHO – who was defined throughout the conference as the guru on obesity policy – pointed to the strong disparity among schools even within single countries to conclude that more work needs to be done on the process of implementation – as also argued by Mr. Goof Buijs of the Schools for Health in Europe Network.
So if member states got a scolding, how did industry perform? It’s not looking good…
Although Stephan Loerke from the World Federation of Advertisers made a convincing argument to illustrate the value of industry efforts, it seems that there is a lack of trust in industry self-regulation among international organizations, and that industry commitments are deemed insufficient.
Stephan illustrated the efforts made under the European Platform for Action Diet, Physical Activity and Health to showcase industry’s proactive involvement. He reasoned that while the direct effect of marketing on children is only “modest”, as noted in most scientific literature, the food industry has recognized that marketing impacts family food choices, preferences and behaviours, and has therefore acted accordingly. Stephan mentioned the new initiative of the International Food and Beverage Alliance, due to come into force in 2016, which imposes thresholds for all marketing platforms, creates a single nutritional model to be used among all countries and bans the use of celebrity personalities.
In a final attempt at convincing his medical public, he decried the low levels of recognition for industry self-regulation… and he was certainly correct.
His most ardent critic was Tim Lobstein of the World Obesity Federation, who diplomatically defined the EU Pledge as not strong enough… to avoid using the term ‘useless’. He noted that, on marketing commitments, the 35% threshold of children watching television (which is necessary to prevent food promotion under the pledge) is very rarely reached. In addition, advergames such as on Nestle’s website are not included in the provision.
Even new developments were easily discarded. Lobstein mentioned that the new nutrient profiling system is still too lenient, especially on the threshold for salty snacks, such as crisps, and sugary products, including cereals. The WHO had other concerns, questioning whether third party auditing is reliable, with Joao Breda suggesting that the scientific community should be integrated in the monitoring of the commitments. He also called for the recently released WHO nutritional criteria for marketing to children to be taken into consideration.
Unfortunately, it seems that International Organizations will remain forever skeptical.
When asked what the biggest obstacle to an effective, coherent policy on obesity is today, Joao Breda pointed the finger at industry, saying that their influence on policy makers is to blame for the lack of effective policy measures being taken… a fairly simplistic answer for a guru, in this blogger’s opinion.
Nonetheless, the Commission was kinder in its approach. Philippe Roux, the head of Unit for Health Determinants at DGSANTE even praised the work of the EU Platform, noting that the commitments made under the EU Pledge (and specifically the responsible advertising measure which classifies schools as protected environments) have made an important difference.
Mr Artur Furtado from DGSANCO also adopted a more balanced position, taking into account the role of government structures in preventing effective policy measures. He claimed that changing representations prevent long term plans from being made and that government systems which separate policy provisions on health from agriculture and education inhibit the development of integrated and holistic solutions. His resounding message: there needs to be greater policy cohesion.
Since we’ve done pretty poorly, what’s next?
In line with the more market-oriented objectives of the new Commission, future work on healthy lifestyles will be aimed at abating health inequalities. The Commissioner has asked the private sector to do more on reformulation in the context of the EU Platform. Better mapping of Member State capabilities and resources to tackle obesity and endorse preventative measures also made the top of the to-do list.
However, the real shift in obesity policy will be a global move to a more comprehensive approach that takes into account the social and economic context of obesity prevention. Prescriptive approaches to obesity no longer make the cut. Providing information in terms of labelling is not a determinant to health in the same way that engaging in physical activity is not a determinant of active lifestyles.
Taking a more holistic approach which encompasses an understanding of how information shapes behavioral choices and how urban environments influence our levels of physical activity, will be crucial to tackling this problem of the modern age – a system has been defined as health in all policies.
Alessia Mortara and Lindsay Hammes
February 26, 2015
With a few days to go before the High Level Conference on Healthy Lifestyles called by the Latvian Presidency, delegates and experts will be making their way to Riga to enjoy a glass of Kvass before discussions begin.
The industry, for its part, awaits the conference’s verdict(s) with baited breath. Will certain products be targeted? Will reformulation need a boost? The answers (or lack thereof) will be revealed on Monday 23rd of February.
In the meantime, let’s recap where the discussion on nutrition and physical activity currently stands….
Let’s begin the story in early 2014, at the High Level conference hosted by the Greek Presidency. The Hellenic crowd focused on non-communicable diseases (NCDs) among vulnerable populations including the elderly and, of course, children. Today, the Latvians have decided to hone the discussion down to the most important and most contentious of issues; one that Latvia’s Health Minister, Guntis Belēvičs, has described as the ‘taste of childhood’.
As is often the case with Council Presidencies, the decision to focus on childhood obesity reflects Latvia’s own public health aims. With obesity rates slightly above the European average, Latvia has implemented one of the most radical prevention schemes in the region. In 2006, the government limiting the distribution of foods containing additives, colourants, sweeteners and preservatives in schools, while also launching a National Sporting Development Program to increase physical activity among children.
But not all countries have endorsed the Latvian approach. With a wide variety of dietary styles and cultural particularities, defining a single, regionally applicable solution to obesity is all but simple. Nonetheless, the EU Action Plan on Childhood Obesity, drawn up under the Greek Presidency will be used as a solid common ground on which to base the discussions and will act as a ‘guide for effective action’.
By 2020, the plan aims to help Member States achieve 6 core objectives, each associated to a number of precise targets :
- Support a healthy start in life
- Promote healthier environments, especially in schools
- Make the healthy option, the easier option
- Restrict marketing and advertising to children
- Inform and empower families
- Encourage physical activity
While the nominal purpose of the conference is to “assess the implementation progress of strategic documents on nutrition and physical activity in the EU”, measuring success will be done in true EU style. To avoid any pointing of fingers at high or low achievers, the agenda of the High Level Conference will focus on sharing best practice among member states – in full respect of subsidiarity and proportionality. We expect much chit chat on who did what and very little practical information.
However, some data does exist and it looks like Europe isn’t doing too badly. The WHO’s country reports reveal that 100% of Member States have adopted policies limiting the marketing of food and beverages to children and over 90% have acted on salt reduction. They’ll need to work a little harder on trans-fat reductions and physical activity recommendations, but there is reason to believe that Europe is moving in the right direction. The 2014 Health at a Glance report also noted that education to consumers, availability of healthy food options and encouraging physical activity are the strongest areas of progress.
Now one question remains: will current progress be enough? What further recommendations can be expected? In line with the Global Status of NCDs Report, it is likely that the WHO will demand stronger political engagement towards encouraging physical activity. This may happen through social marketing and mass media campaigns. Other recommendations could focus on the re-activation of the fruit and milk scheme, recently suspended by the Juncker Commission under its new Work Programme. Only time will tell…
Either way, we expect that the High Level Conference will directly influence the EPSCO preparatory meetings and the final Council Conclusions later this year. If we were academics we would ask… To what extent? Well, to the extent that scientific opinion is taken into account in EU policy making. While experts will likely call for the need for social involvement programmes of adequate dietary guidelines and of perfectly nutritious school meals, country budgets will still be limited, political and cultural approaches to food will still diverge and in the end… humans will be humans… and we do love our culinary delights!`
Our policy analysis on the conference will be coming soon … watch this space!
Alessia Mortara, Adriano Addis and Lindsay Hammes
February 19, 2015
The long-awaited announcement has finally arrived! We watched, not quite with popcorn, but at least with baited breath, as Commission President Juncker announced his new College of Commissioners and DG allocations for the next five years. Amid festive acclamations, some raised eyebrows, temper tantrums and maybe even a solitary tear, 5 former PMs, 11 financially-savvy candidates, 8 foreign affairs specialists and 7 incumbent ministers were chosen to join the Dream Team. In true Juncker style, he surprised and perhaps confused us all.
Selecting the perfect ingredients for a politically calibrated, yet functional College of Commissioners has been a careful balancing act, leading to more than a few controversial appointments. But Europeans, fear not! Guardians of the peace and right hand men to President Juncker are the newly appointed Vice Presidents, endowed with the duty of coordinating the works. The role of these watchdog VPs is yet to be defined, as a number of policy areas fall under multiple presidencies and seem to be affected by an ‘overcrowding phenomenon’ . Will too many cooks spoil the broth?
The ‘chef’ seems confident as he blends and stirs his employment-flavoured, growth-spiced ‘bouillon’. So it appears that only time will tell whether the internal decision making systems are robust enough to prevent a multi-directional sprawl of policy proposals. Will our chef – already called a ‘Spitzenkandidat’ by some – be able to satisfy the diverse group of political ‘gourmandes’ that is the Parliament.
And how will the restaurant owners react to this new, seemingly complex methodological approach, will the chef have more liberties in the kitchen or less? Analogies are all well and good, but the issues are real, and the question of whether the power of the Commission to will return to the golden age of the Delors years is lingering on everyone’s mind. Might the Council force its hand, should overly complex decision making procedures lead the delicate institutional machine to stall?
Some might say that the balance of power will shift according to themes and personalities; however the problems that lie ahead are all fairly controversial and newly instituted officials will be keen to prove their worth under the daunting stare of the European public. The Russian ban on food imports and the ambitious objectives of an Energy Union and Common Asylum System contrived by Juncker himself, are challenging hurdles on the horizon.
So what is the recipe for success? A masterful chef, cooperative cooks, a lenient clientèle? Possibly a homogeneous amalgamation of all the above, however the first major test of whether this start-up restaurant is of Michelin star quality will depend on the willingness of talented officials to set aside patriotic claims in order to work together to achieve the ambitiously conceived and masterfully crafted plate designed by Juncker.
Alessia Mortara, Aoife O’Halloran and the FH Institutional Research Unit
September 19, 2014
Unlike the hurley-burley of these first days of institutional activity, August was a fairly quiet month in Europe – far set from the troubles and tensions of previous summers and the frenzied preoccupations over economic collapse. This year, Brussels emptied itself of tired civil servants, who trudged, nostalgically back to their homelands, and European capitals were filled with an unusual sense of calm – a pause between political seasons.
However, not all states were blessed with calm and warming summer breezes. A tempest was slowly brewing in Portugal where, on 4th August, the crisis hit the second largest national bank (by total reported net assets) and the ship was sunk. Banco Espírito Santo (BES), with €80.2 billion in assets and €36.7 billion in customer deposit, disappeared almost overnight.
Leaping into action, the Central Bank of Portugal resolved the bank by separating BES’s sound business activities from toxic and dangerous assets thus creating a ‘bridge bank’. The “good bank” is now supported by €4.4bn from the Portuguese state, while the “bad bank” has kept the unfortunate, but appropriate, name of Espírito Santo (i.e. the Holy Spirit, but also the name of the proprietor family) and will be wound down in due course.
It seems inconceivable that only three months after Portugal’s victorious emergence from the bail-out troika (European Commission, ECB & IMF), with all that it entailed in the form of deeper scrutiny and attention, public money is still being used salvage the remnants of a banking disaster and to protect investors from ample losses. After years of Banking Union negotiations and reassurances to markets, policymakers and regular sunbathers, will all be lost?
Let’s take a look at the bigger picture – the who’s and the what’s.
With a century and half of history at its shoulders, the group to which Banco Espírito Sancto belongs, has progressively grown to become a vast empire, held in majority by the descendants of its founder. In the process, the group has expanded across borders, covering different countries and various sectors from banking to tourism and construction, thus becoming a common name in Portuguese households, the local Rockefellers.
However, this wealth of historical heritage brought little wisdom with it. When a new executive team took over BES in July, it soon discovered that the former administration had hid from regulators and the world, a €1.5bn hole in its budget, generated in the first-half of the year (50% of what BES has lost in total) – a situation far from that expected for a bank held by Portugal’s richest family.
Advice given by BES’s external auditor, to counter over exposure to conflicts of interest within the group, was ignored and proved to be fatal. Today, it seems clear that the undetected operations were repackaged by a financial intermediary partly owned by BES, in order to keep them off the balance sheets.
Record losses meant that BES’s solvency ratios fell below the regulatory minimum required to receive ECB funds, and the Bank of Portugal was confronted with an urgent choice – whether to mount a rescue plan, protecting senior debt holders, or allow BES to orderly fail by applying soon to be implemented Banking Union rules.
Overnight, the Bank of Portugal decided to undertake a sort of hybrid rescue plan, mixing both bail-in and bail-out tools.
Bail-out tactics: In order to properly capitalise on the new bridge bank, the Portuguese Resolution Fund was given €4.9bn, of which €4.4bn deriving from the Portuguese State – an amount of money that tax payers will not recover if the selling price of the bank remains lower than the amount lent.
Bail-in tactics: The bridge bank system implied that all the junior bond holders and most shareholders whose assets had been isolated in the “bad bank” would endure severe losses.
If the procedure was completely legal, it was still in grey area. Had the Governor of the Bank of Portugal followed new EU rules on bail-in processes, senior debt holders and large depositors would have been part of the haircut too. As from the 1st January 2016, preserving them will no longer be possible.
Reasons for the choice of a hybrid system are varied and could be seen as a reluctance of regulators to go against the European conception of senior bond holders being implicitly backed by the state, but we’re getting ahead of ourselves and jumping to conclusions.
Let us now look at the “so what’s”.
All signs (or at least those we’ve chosen to look at for this blog) show that the whole operation was a success. And an admirable one at that! Less than a month after the bank was wound down, Portuguese 10 year bonds have reached their lowest point for debt emission in 2014 and Portugal is experiencing growth again for the first time in four years (EC figures).
Source : http://www.bloomberg.com/quote/GSPT10YR:IND/chart
Moreover, being attached to the new, “good” bank, senior bonds barely shifted, while junior bonds have plummeted, illustrating a sense of trust in the path chosen by the Bank of Portugal.
Data therefore suggests that financial markets have bought into the “ring-fencing” tactic, and the risks associated to BES senior bonds will not threaten other banks or the rest of the economy.
On that happy note, but in the slightly gloomier spirit of autumn, an underlying question remains – whether this well-orchestrated resolution and the resurrection of the BES banking group, would have complied with the soon-to-be rules and principles of the Banking Union.
Quite frankly, the answer is – not entirely – or at least, not as shown above. Contentious areas are capital requirements, supervision, bail-in vs bail-out systems (let alone question of whether funding in the Single Resolution Fund was or ever will be sufficient) and, the true moratorium – whether senior bond holders understand the need to adapt their behaviour as from 2016 when the EU-wide rules on bail-in kick-in.
But we’re not going to ask the big question – whether the Banking Union has really changed anything. We’re not! Because of course… it has! So don’t be so gloomy. Go catch the last sunlight, go chase rumours about the next Commission and let summer events be summer events and… have faith!
By Martin Bresson, Claire Bravard & Alessia Mortara
When a regulator decides to close down a bank that because it failed.
 Bond holders that will be will be paid back before junior bond holders and shareholders if the bank goes bankrupt (and if there is enough money left)
September 8, 2014
FleishmanHillard recently gathered representatives of the food & beverages, agriculture and retail industry to hear about the expectations of European consumers towards the food industry. To feed the debate, Nick Andrews presented the recent FleishmanHillard research called “Authenticity”. The research, undertaken in Germany, the Netherlands, and the UK with expert consumers revealed that the industry is falling short on people’s expectations to provide transparency around production methods and sources, more personalised and easier to use products and services.
Commenting on the consumer’s expectations, the Deputy Director General for the Food Chain at DG SANCO, Mr. Ladislav Miko, shared with the participants his views on how the European Commission’s current and future initiatives will support the industry meet these expectations.
The Authenticity Gap research is available on our Center On Reputation website and will give you insights into what consumers expect from your industry! Reputation matters when it comes to policy-making and regulation too!
How is your company doing reputation wise and how much does it support or hinder your public affairs objectives?
July 15, 2014
This year’s edition of Brussels Forum, hosted three interesting speakers: EEAS’s Lady Ashton, Council’s Mr Van Rompuy and NATO’s Rasmussen. All three of them will step down from their positions this year, which inspires for a reflection about their key challenges, successes and failures over the past years.
Since Van Rompuy became a President of the Council five years ago, we have seen a transformation of the Council into one of the most important EU institutions. A little joke made by President Van Rompuy during Brussels Forum actually contains a bit of truth about why the Council became so influential: “I took this job now almost five years ago, and some are saying that the European Council became the most important institution in the European Union. There are two reasons for this. I don’t know if it is true, but there are two reasons. The first reason, of course, is they had a brilliant President of the Council. The second reason is that we had a crisis, and a crisis helps a lot to put people together. We can’t have a meeting with the 28 leaders and then after the meeting I had to confront the president, say we had an excellent meeting, but we just didn’t agree on anything. That’s impossible. We had to agree. We had to converge. We had to take decisions otherwise we were punished by the markets the day after.”
*Photo: Ewa Abramiuk Lété
Lady Ashton also presented a few reflections about her achievements: “(…) success for me is about making sure there’s a second high representative, which there will be. And I said that for my time in office, there were three things that mattered. One, I had to build a service because when I started, we had lots of fabulous people, but they were scattered in eight buildings in Brussels and across the world doing things that were not what we do now. We now have 140 delegations that are EU operating across the world who are a real network of impressive people who can deliver the range of what the EU does”.
Indeed, it must have been a difficult job to create this machine, one which requires a skilful diplomat and negotiator, which Lady Ashton is. However, while the first part of the work has been done – creating a network of delegations around the world – it will be interesting to observe how this peculiar machine will develop under new leadership.
Strong words came from NATO Secretary General Rasmussen, who will be leaving his position this year but, according to the Brussels rumour mill, might remain in town in a different role. Rasmussen said “We cannot continue to disarm while the rest of the world is re-arming and some are rattling their arms on our borders. NATO’s greatest responsibility is to protect and defend our populations and our territories. To do that we must insure that we have the full range of capabilities to deter and defend against any threat. To back off diplomatic softpower with military hard power. Now we need real power.” Norwegian Jens Stoltenberg has just been announced as his successor and while congratulations to the new Secretary General are flowing in and the excitement around this new appointment is still high, it will be interesting to observe if his rhetoric will stay as strong.
Three strong individuals will leave Brussels, however I am looking forward to seeing which opportunities this change will bring for Europe and NATO.
Ewa Abramiuk Lété
March 28, 2014
Earlier this week I attended the Berlin Energy Forum, previously known as the “Berlin Fossil Fuels Forum”. Beyond the valuable networking opportunity, the event came with a reaffirmation of Germany’s central place for EU energy policy and some questions about the role and status of fossil fuels in policy discussions.
Germany: not just one amongst others
In Brussels we want to believe that large Member States have equal chances of influencing EU policy discussions. When it comes to energy policy, it is however hard not to notice the huge impact that Germany has over the policy debate.
In 2011 Germany launched the most radical energy reform with its Energiewende. On Monday Sigmar Gabriel, the new Vice-Chancellor in charge of economic and energy policy, set out the reasons behind this truly bold political decision. And he is convinced that other countries will follow. Of course this ‘Energy Turn’ is first known as the complete phase-out of nuclear by 2022 but it is also more generally the complete change in power sources, with a large and rapid boost for renewable energies. Three issues have emerged as a result and are now at the heart of EU energy policy discussions:
1) Energy Costs: Germany’s push for renewable energies led to what was described by the Commission in Berlin as ‘overcompensation’, especially for solar. Does it not seem strange that, of all sunny places in the world, 35% of global solar capacity is now located in Germany? As a result of this massive increase in renewable subsidies, a German household pays an extra €260 a year on its electricity bill.
2) State Aid: DG Competition recently brought a case against Germany and the exemptions from the EEG (Renewable Energy Act) for energy-intensive industries. Should they stop being exempted, German energy-intensives could face a net increase in electricity price of up to 50€/MWh. Exemptions from renewable surcharges are also a major topic of the draft State Aid Guidelines for Energy and Environment, open to consultation until tonight.
3) Coal vs. Gas: To provide stability and back up intermittent renewables, Germany is burning more cheap coal (lignite), whilst German gas power plants are being mothballed. Experts argue that Germany will miss its 40% GHG reduction target by 2030 because of this ‘coal renaissance’ in the country.
Due to the issues described above, the Energiewende is considered from abroad with a degree of scepticism. The future will tell us if the German energy revolution delivers on its promises. One thing is sure: it will continue to set the energy policy agenda in Brussels.
Fossil Fuels: In or Out?
This year, the Commission considered that the previous focus on Fossil Fuels was no longer relevant or appropriate and decided to focus instead on more horizontal topics, roughly corresponding to the inevitable energy triangle: sustainability, security of supply and competitiveness. It doesn’t mean that fossil fuels were kept out of the programme. Nuclear, coal and natural gas representatives were largely involved in discussions. However, the Berlin Energy Forum didn’t address the challenges of primary energy supply, largely focusing instead on the power market. This led to some confusion, especially as the Commission had planned an additional session outside of the official programme to discuss oil and gas supply.
Clearly the Commission wants to send a signal that Europe needs to move away from fossil fuels. This is part of a broader story of progress, of Europe reducing emissions and declaring its “energy independence” (as quite provocatively described recently on the Commission’s Twitter account). Some may argue that this story also needs to be grounded in reality. And the reality today is that, as Fatih Birol pointed out during the debate, fossil fuels still represent 82% of the global energy mix, only expected to fall to 76% by 2035.
Whilst the Commission should more clearly acknowledge that fossil fuels cannot simply be dismissed from discussions, it is also the fossil fuels industry’s role to demonstrate they can be a part of this story of progress, by emphasising their immense innovation and technological expertise and by demonstrating they can be used in more energy-efficient ways in the future. They may not have their own separate forum anymore, but this gives them a great opportunity to show to the Commission that they can contribute to discussions in a constructive manner.
February 14, 2014
The EU Emissions Trading Scheme (ETS) is here to stay and stakeholders share a common vision on how to fix it, that was the basic takeaway from a roundtable on carbon market reforms FleishmanHillard hosted along with SSE and Oxera last Friday.
For those whose full time job is not in the EU Energy or Climate field, the ETS is the largest multi-country, multi-sector greenhouse gas emissions trading scheme in the world and the chief instrument for the EU in meeting its emissions reduction targets. However, a huge surplus in allowances has seen prices fall from €20 a tonne in 2011 to €5 a tonne today, reducing incentives to switch from heavily polluting fuels such as coal to cleaner alternatives such as natural gas or renewables, like wind and solar power.
Given the timely nature of the event (At the time of writing, the famous backloading dossier which through the tempera removal of allowances would prop up the carbon price has just received the backing of MEPs in Plenary) it was little surprise that over 40 participants came to FH’s offices to exchange views with the Commission, industry and NGO’s on how best to get the EU’s principal GHG reduction instrument back on track.
What was perhaps a little more surprising was how aligned participants – EU policymakers, NGOs and industry types alike — seemed to be in their thinking on what should be the next steps to fixing the ETS and getting the EU carbon market back in order.
In November 2012, the European Commission, in its ‘”State of the Carbon Market in 2012″ document, presented 6 potential options to reform the EU ETS. At the roundtable it became apparent that a loose consensus was emerging around the following three-step approach, which includes elements of the Commission’s thinking but also a number of new elements that have been introduced by stakeholders in recent months;
Step 1 – Backloading: The backloading of 900 million EUA would be a necessary but far from sufficient first step. The backloading of allowances should prop up prices temporarily above the current €5 a tonne number but will not increases prices to the €25-30 a tonne figure original envisaged by the Commission to stimulate low carbon investment and new technologies. With MEPs having given their support to backloading in a full European Parliamentary vote Tuesday, Member States should do likewise in coming weeks, by approving backloading. The first allowances to be backloaded in 2014 or 2015 depending on what timetable the Climate Change Committee decides Dec. 16.
Step 2 -Early reduction of annual linear factor: This tool is effectively an annual decrease in the amount of allowances in the system and is in line with one of the six options laid out by the Commission. Reducing the supply would push up the ETS price. Participants at the FH event suggested revising the annual linear reduction factor by -1.74% as soon as possible, most likely in 2016 or 2017. Some participants noted that it was possible to even go beyond 1.74% to a more ambitious 2.5% reduction.
Step 3 – Supply adjustment mechanism (SAM): A supply adjustment mechanism would automatically, based on pre-determined rules, adjust the supply of allowances in case of significant deviations in the economic development. The idea of having a supply adjustment mechanism to act as a ‘shock absorber’, independent of political interventions, was first floated by IETA in reaction to the Commission’s stakeholder consultation. Support for this measure has been growing consistently since with DG CLIMA Commission also seemingly supportive.
The main difficulty with the SAM remains how the adjustment mechanism should kick in. It could be a) Emissions-based – simply identify a lower and upper threshold; b) GDP-based – reliant on economic activity and c) ETS allowance Price-triggered – seen by many participants as the simplest option to implement but more politically challenging.
Looking ahead, the Commission will most likely come forward with a proposal on structural reforms of the ETS in January, most likely as part of the large package of policy proposals to be released on January 22; this package is also expected to include a 2030 Climate and Energy framework, a study on the various factors that drive energy prices and a formal Commission view on shale gas (A Commission policy proposal on shale gas also remains a possibility).
Given the legislative timeline, the proposal introduced in January will not be finalized in this Parliament, but will rather seek the endorsement from Member States at the European Council summit in March.
As one participant noted at the FH roundtable: given the huge oversupply of allowances in the ETS today, without the possibility of reform, the price of ETS allowances would actually be closer to zero rather than the current €5 a tonne level. The €5 a tonne price represents investors’ confidence, however thin, that policymakers can introduce meaningful reform to a collapsing market.
After the Commission shows its hand in January, all eyes will be looking at the Council in March to demonstrate that the political will exists at the highest level to reform the ETS.
December 12, 2013
Party hats out.
The European Commission informed the world Wednesday that at least 20% of the European Union’s budget for the next 2014-2020 funding period will be spent on climate-related projects and policies.
Says Connie Hedegaard, the EU’s climate watchdog honcho, in the Commission press release: ”Today is an incredibly important day for Europe and for the fight against climate change….This is a major step forward for our efforts to handle the climate crisis…”
And: “This underscores yet again Europe’s leadership in the fight against this crucial challenge. I believe the EU is the first region in the world to mainstream climate action into its whole budget.”
Hedegaard’s gushy tendencies and legacy-craving aside, there a few points here to consider.
First, the tone-deaf question: With European and Eurozone unemployment, take your pick, still at record levels, economic growth still limping along and deflation in Europe now a creeping threat because of the aforementioned, is the Commission’s, Hedegaard’s, chest-beating on EU climate change ‘leadership’ something people in Europe really care about right now?
Secondly, sentient beings are generally already aware that climate change abatement is a high EU policy priority — the only one actually where alignment exists between Member States — and that the EU and European nations have enviably produced all sorts of meaningful and important policies to decarbonize Europe. But chest-beating on an almost daily basis about it, as Hedegaard does, is desperate.
Worse for Hedegaard and Company is that the ritual of telling the world how the EU, representing a mere 10% of global emissions, ‘leads’ on climate change is often a quiet picture, with a self-designated leader with no one following from behind.
Third, what matters most actually, though, comes down to outcomes, not inputs of how much cash your throwing at the important problem, and the chest-beating.
A couple of examples are instructive: Despite being the engine of the continent’s renewable energy spending, Germany is still expected to see carbon emissions rise this year by 2%, while carbon emissions in the U.S. are falling (from a high base, of course) and near a 20-year low.
Electricity from the dirtiest fossil fuel, coal, is filling the gap in Germany for the series of natural gas power plants closed the past two years from the unintended consequences of Germany’s uber spending on solar and wind power; meanwhile, the long-told story of America’s jackpot with shale gas has resulted in the shuttering of dozens of coal plants and falling emissions there and tanker-loads of of cheap coal exports to Europe, among other places.
If Europe wasn’t mired in recession, its emissions would be higher by any measure. And many Europeans probably would hope, quietly, that carbon emissions actually begin to rise again in the continent as a bloc as an indication that economic conditions are improving.
To paraphrase the tired saying: speak lightly, Hedegaard and Company, but carry a big stick.
By Spencer Swartz
November 20, 2013