Brussels edition: The long climate fight

Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union

And now come the years years of wrangling. EU member states and even some energy-intensive industries hailed the bloc’s momentous climate plan, embracing its grand ambition with lofty prose. But almost every detail of the proposal — from a ban on new combustion-engine cars by 2035 to imposing new costs on dirty home heating — will be fought over in European capitals and the EU parliament in Strasbourg. Europe’s airlines are pushing back, saying a planned tax on jet fuel is counterproductive. The maritime industry warned a plan to include shippers in the bloc’s carbon market will hinder talks on a global carbon levy. But if the EU can pull it off, the future could look very different. Take a peek here into the not-quite-science-fiction version of the EU in 2035, complete with organic wheat vegan cheese pizzas.

What’s Happening
Fit for 55 |
Confused by the deluge of legislation the Commission proposed to meet its 2030 target? You’re not alone. Here are the seven elements of the package that you should care about, touching on everything from the price of a plane ticket to the cost of heating your home.

Price Tag | It all means the world’s largest carbon market is about to get bigger and stricter. It’s the most comprehensive overhaul since the Emissions Trading System was created in 2005, as the EU tries to cut emissions faster than ever before.

Climate Frustration | Though the Green Deal is an historic moment for Europe that will foster climate action globally, Pascal Canfin, who chairs the ENVI Committee at the European Parliament, opposes the extension of the carbon market to road transport and heating. “That doesn’t drive the change, it creates frustration,” Canfin told us, noting that in his native France a similar move resulted in the yellow vest movement.

Merkel Mission | German Chancellor Angela Merkel heads into a visit with U.S. President Joe Biden today as she prepares to hand her eventual successor a host of challenges she wasn’t able to solve. These include a recalcitrant auto industry, an economy tied uncomfortably close to that of China’s and fraught relations with Russia and its vast energy reserves.

Three Suits | The EU is preparing to take Hungary and Poland to court as soon as tomorrow over laws the bloc says discriminate against LGBTQ people. In a third proceeding, the Commission will refer Hungary to the EU’s top court for unlawfully restricting access to the union’s asylum system, according to documents seen by Bloomberg.

In Case You Missed It
Virtual Euro |
The European Central Bank took a major step toward a digital euro by approving an “investigation phase” that could ultimately lead to a virtual currency being implemented around the middle of the decade. The next stage will last 24 months and aims to address key issues on design and distribution.

Travel Curbs | The Biden administration is showing no urgency in easing travel restrictions that prevent most Europeans from traveling to the U.S., despite rising EU frustration over the limits. Diplomats have been pressing for Washington to ease the ban, citing inconsistent rules, economic costs and a scientifically outdated strategy for halting the virus.

Sustainable Finance | Ethical ambitions are becoming the centerpiece of European credit markets, making the region the undisputed world leader in sustainable financing. The share of cash raised this year by European issuers that has been linked to borrowers’ performance in Environmental, social and governance (ESG) initiatives is several times higher than the proportions for the Americas and Asia-Pacific.

Polish Standoff | Poland’s rule-of-law standoff with the EU is escalating with the country’s constitutional court openly defying a pillar of the bloc’s legal system. The Warsaw-based tribunal ruled that interim orders from the EU’s top court over judicial matters weren’t compatible with Polish law and therefore not enforceable. The decision comes as the EU Court of Justice told Poland to “immediately suspend” a key plank of its contested judicial reforms.

Case Dismissed | Nike’s effort to challenge an EU decision to probe its tax affairs was dismissed by the bloc’s General Court, which ruled that the Commission complied with procedural rules. In 2019, it opened a probe into whether so-called tax rulings by the Netherlands may have given the sporting-goods giant an unfair advantage over its competitors.

Chart of the Day
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The EU’s plan to stop domestic producers of steel, cement, aluminum and fertilizer being undercut by foreign companies due to stricter climate rules threatens a number of diplomatic spats. Russia for example, is the source of around 36% of fertilizer imported into the EU — something that could be impacted by the proposal for a new levy, known as the carbon border adjustment mechanism. The bloc hopes that it will spur other countries to stiffen their own restrictions on emissions, but it could also see production shift to companies inside the EU.

Today’s Agenda
All times in CET

  • 10:30 a.m. Commission Executive Vice President Timmermans and Economy Commissioner Gentiloni hold a news conference on the carbon border adjustment mechanism and energy taxation
  • 11:15 a.m. Timmermans and Transport Commissioner Valean hold a news conference on making transport greener
  • 5:30 p.m. German Chancellor Merkel receives an honorary degree from Johns Hopkins University
  • 10:15 p.m. Merkel and U.S. President Biden hold a news conference after talks at the White House
John Ainger and Kevin Whitelaw
 
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