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The future of the EU transport sector (2021-2024) – four trends

For the EU’s transport sector, the last year and a half was exceptionally challenging with passenger and freight transport being severely disrupted due to the COVID-19 pandemic. Although the recovery of the sector is of vital importance for Europe’s economy, it also provides a momentum for the industry to act on the ambition of decarbonization and reaching climate neutrality by 2050. The EU Strategy for Sustainable and Smart Mobility (“EUSSSM”), published by the European Commission on 9 December 2020, provided a blueprint on how the EU’s executive foresees to reduce transport emissions in broad terms. The recently published Fit for 55 package puts forward concrete legislative proposals to cut back carbon emissions across the different modes of transport. Published on 14 July 2021, the Fit for 55 package proposes concrete tools on how to reduce the carbon emissions of the European transport sector via new and revised legislation. Based on our latest intelligence and the positioning of our clients on the publications of these files, Dr2 Consultants’ transport practice presents four emerging trends that will shape the future of the EU transport sector in the years to come.

1. Prioritizing alternative fuels across all modes of transport

The uptake of alternative fuels will be a key priority for the Commission to cut emissions and create jobs. The EU’s executive arm aims to accelerate the production of low-emission fuels and the deployment of sustainable vehicles and vessels. Following the publication of the Hydrogen Strategy in the summer of 2019 and the EUSSSM further outlining the broader uptake of green hydrogen in the transport sector, several legislative proposals in the Fit for 55 package formulate ambitious targets for new types of alternative fuels.

The details of the fuel mix for the future of the EU transport sector are worked out in both FuelEU proposals (FuelEU Maritime and ReFuelEU Aviation) that set out a pathway for sustainable fuels to be used in the maritime and aviation sectors. The revision of the Renewable Energy Directive, the REDIII, provides targets for the EU energy mix as a whole, aiming to increase the share of renewables, electricity and hydrogen. In parallel, the Commission published a revision of the Directive on the infrastructure for alternative fuels, the new Alternative Fuels Infrastructure Regulation (AFIR). The proposed Regulation will accelerate the development of the necessary infrastructure across Member States to stimulate the uptake of sustainable fuels for all transport modes. The European Commission proposal upgrades the current AFID (a Directive) to a Regulation, which means the Member States will be obliged to meet the set targets. Transport ministers responded to the proposal by calling for clear objectives and the deployment of wide public network of recharging and refueling infrastructure for alternative fuels in transport. The ministers held that the new regulation should ensure the required deployment of interoperable and user-friendly refueling infrastructure for clean vehicles across the EU, and at the same time, stimulate the growth of the market and open new opportunities for the EU industry.

2. Safeguarding competition in the aviation sector

The second trend in the future of EU transport sector concerns European airlines, which have been intensively exploring potential pathways towards reducing their carbon footprints (by offsetting or market-based measures). To limit the climate impact of air travel, it is essential that a basket of measures is applied simultaneously to allow European aviation to fully contribute to the climate effort while long-term solutions are implemented to reduce emissions. These measures include, i.e. greener aircraft technologies, more efficient operations and infrastructure, the development of and appropriate support for sustainable aviation fuels (SAFs) and smart economic instruments.

The sustainable growth of aviation, which produces socio-economic benefits and contributes to achieving European environmental targets remains one of the industry’s most important objectives. There is an urgency to make bold political decisions that will help European aviation meet these objectives for the benefit of passengers and businesses that rely on sustainable air connectivity. The EU should however refrain from imposing unilateral measures at EU level that would hamper European airlines’ ability to compete at global level. The proposed EU ETS, ReFuelEU Aviation and Energy Taxation Directives are central in decarbonizing the sector but will require substantial investment from the aviation industry and thereby will challenge the competitiveness of the European aviation industry if not applied equally to non-EU carriers flying in and out of the EU.

3. A modal-neutral approach, facilitating sustainable transport 

With the upcoming legislative initiatives, one sector seems to be the winner: the railway sector. While the EU ETS, ReFuelEU Aviation and Energy Taxation Directives put more pressure on the aviation sector, and Member States such as Austria and France announced that they are considering cutting short-haul flights significantly, there will be a gradual modal shift to railway. Moreover, 2021 marks the European Year of the Rail, an initiative proposed by the European Commission. This initiative highlights the benefits of rail as a sustainable, smart and safe mode of transport. Altogether, railway undertakings are already experiencing an increasing market demand for international rail passenger transport. According to the Dutch Railways (Nederlandse Spoorwegen – NS), the principal Dutch rail passenger operator, in shaping the future of the EU transport sector, EU legislation should stimulate the modal shift and the uptake of climate-friendly alternatives such as rail. In order to promote the development of an international passenger service market, the NS is of the opinion that the EU should strive towards the creation of a European high-speed network that is interoperable, linking European capitals and major cities and connecting urban nodes and airports. A level playing field between the different transport modes will be crucial to ensure the swift decarbonization of the European transport sector as a whole.

While both the EUSSSM as well as the Fit for 55 package have a modal-neutral approach, both focus on facilitating the market demands and stimulate sustainable modes of transport. Through the proposed legislation and revisions, the European Commission addresses issues related to establishing a level playing field between the modes of transport (i.e. fuel taxation, infrastructure charges), improving intermodal ticketing services and increasing the customer experience through digital solutions such as the Mobility as a Service (MaaS) concept.

4. Green funding to enhance the resilience of the EU transport industry

In order to stimulate the resilience of the European transport industry and to realize the ambitions that are set out in the EUSSSM and Fit for 55 package, investments are needed. With a combined firepower of more than €1,800 trillion in the EU budget and Next Generation EU recovery fund, EU Member States will have various funding instruments at their disposal to finance the recovery of the EU transport sector.

Member States have been drawing up national recovery plans in order to receive funds from the Recovery Fund. Most Member States, with the exception of Bulgaria and the Netherlands, have submitted these plans, 12 of which were approved this summer by the Council of the EU. The Commission has requested the Member States to focus their recovery plans on the EU ambitions in the fields of digitization and sustainability. In the plans that have already been submitted by most Member States we can see a focus on green hydrogen, charging infrastructure and e-mobility. The submission and approval of these recovery plans means that the money from the recovery fund, approved almost a year earlier, can finally start being paid out. Projects that have a cross-border impact, a clear link to sustainability objectives and which can be executed in the next five years will get priority. According to the Commission, 30% of all funding through the Recovery Fund and in the new EU budget will be spent on sustainable projects. CINEA will open its first CEF Transport calls on 16 September, meaning that the distribution of funds is expected to start very soon.

Next steps

Following the official publication of the package of proposals by the European Commission on 14 July, the legislative processes in the European Parliament and the Council of the EU have officially started. Once the institutions defined their own positions, most proposals are expected to go into Trilogue negotiations next year, but for some more controversial files (such as the Energy Taxation Directive and the new proposed EU ETS system) these timelines are likely to be extended.

Additionally, several important proposals for the transport sector are still expected on 14 December 2021: The revision of the TEN-T Regulation (focused on transport infrastructure along a core network of corridors), the revision of the Intelligent Transport Systems (ITS) Directive, and the EU Rail Corridor Initiative. Consequently, legislative processes will run far into 2022, maybe even 2023 for some files, meaning that there is a significant window of opportunity for EU stakeholders to get involved in the process.

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 COemission standards might radically impact your day-to-day business operations. More than ever, making your voice heard is crucial.

Fit for 55 services

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 updates here.

How national elections might shift power relations in the European Council?

The European Council plays a central role in defining the common political orientations of the EU. With the EU-27’s political leaders represented in the European Council, national inclinations and politics are concerted, as the Member States defend domestic agendas through coalition-building with like-minded countries. Dr2 Consultants’ international team shares some insights on how several upcoming national elections will possibly impact the power dynamics in the European Council.

Changes in the national political arena

The European approach to COVID-19 showed the resiliency of the European Union and its Member States, but it also showed how difficult it is to concert a common approach, and how fragile it is. With domestic change looming, the power dynamics and coalition-building in the European Council is likely changing in the upcoming years. Where the relationship between Merkel and Macron ever more shows the strength of the Franco-German axis in the EU during the recovery phase of the COVID-19 pandemic, German elections and French elections this year could mean a blow to this ‘motor of European integration’.

What to expect?

The months ahead will witness major changes in domestic politics of the EU Member States that have been at the forefront of the discussions around the Recovery Fund allocations: namely France, Germany, Italy and the Netherlands. The European Council dynamics will likely change according to the new political setting that will rise in the upcoming months.

Potential power shift on Franco-German axis

The main uncertainties lay on French-German elections, which, depending on the outcome, might lead to a shift in power relations among the EU Member States. German elections showed a rather fragmented political landscape where, for the first time, there is no clear winner. A coalition is to be formed, but the involved parties are not necessarily aligned to one another in terms of domestic and international policy. Macron’s French influence projection is slowly filling the gaps provided by German political uncertainty, while at the same time keeping a close eye on collaboration with its partner. If France were to take a more influential role within the EU, it could steer the European Council in a new direction. However, this rise in the level of influence could be completely nipped in the bud if Macron were not to be reelected in 2022, and even more so if he were to lose to euro-skeptic Marine Le Pen.

Potential friction on economic solidarity

The new Italian PM Draghi is also likely to trigger new dynamics in the European Council, due to its experience in EU affairs and fiscal rules observation, which inevitably denote recognition of its political stature. Mario Draghi’s expertise in financial matters could boost Italy’s capacity to make the best use of the EU Recovery Fund allocations, avoiding misuse or bureaucratic loops ending up in unspent resources. Finally, the Netherlands, which are so far seen as the guarantor of fiscal respect, risks being further isolated within the European Council due to the difficulties in shaping a coalition government, which could hamper its ability to optimally represent its interests. These political changes could lead to the creation of new relations within the European Council, with the Northern countries losing leverage and the Southern countries gaining ground for a solidarity approach combined with due financial observance.

Country-specific analyses

Dr2 Consultants’ international team constantly monitors political changes throughout Europe, and the subsequent change of political dynamics at the EU level in order to identify threats and opportunities for its clients. After all, the political consensus in the European Council will impact the policymaking direction that the European Commission will take in the long run.

For the interested reader, a short analysis per country follows below.

Germany – a great legacy for a fragmented political landscape

On 26 September 2021, Federal Elections took place in Germany to name the successor of Angela Merkel. A turning point in the history of unified Germany, as the current Chancellor has been in office for more than 15 years. The result is rather uncertain as a rather fragmented political landscape was revealed. For the first time since 1950s, Germany is to be governed by a three-party coalition which is significantly divided on the political spectrum. It is unclear at this point whether the coalition will tilt left or right. The two dominant political camps — the center-left Social Democrats (SPD) and the conservative alliance of the Christian Democratic Union (CDU) finished only 10 seats apart, while the Greens scored their best result of all times finishing third. Most likely, there will be an alliance of the Greens and the liberals (FDP) with either the social democrat SPD or the conservative CDU/CSU. So, the hottest question at the moment is: who will replace Angela Merkel?

As his rivals kept on making missteps during the election campaign, SPD’s Olaf Scholz candidacy to represent a safe pair of hands to succeed Merkel became increasingly plausible. Scholz ran against Armin Laschet – Merkel’s likely successor in CDU – and Markus Söder, the CSU leader of Bavaria. Yet, whoever the next chancellor will be, one thing is clear: either of the candidates will face stronger pressure to provide the European Union with robust leadership.

For sure, the new coalition will have a strong impact on the German-French partnership. The French seem to have strong reservations regarding FDP’s participation in the new government. The liberals oppose France’s key projects at the EU level, such as EU-wide common debt or a European deposit guarantee. In contrast, SPD’s lead candidate Olaf Scholz is better seen by the French, on top of his close relationship with his French counterpart. In addition, Scholz’s openness towards the common EU debt could represent a departure from Germany’s traditional stance of fiscal rigour.

France – a window of opportunity for a plethora of candidates

With the French elections slowly approaching, more and more candidates are taking their run for the presidential elections of April 2022: Paris’ Mayor Anne Hidalgo, who will represent the left-wing Parti Socialiste; Yannick Jadot from the Greens; the far-left Jean-Luc Melenchon, leader of La France Insoumise; Fabien Roussel, leader of the French Communist Party; and Marine Le Pen, the far-right president of the Rassemblement National. This being said, the current president Emanuel Macron remains a strong candidate, although he has not yet officially declared his candidacy.

Polls taken out in early September show that Macron and Le Pen are the strongest candidates, and in a duel in the second round, Macron would outcompete Le Pen with a rather small margin. But one thing is clear, neither Macron nor Le Pen achieved their objectives in the June 2021 regional elections, which, in an unexpected turn of events, favored the Greens and traditional right-wing party Les Republicains.

In this plethora of parties and candidates, the balance tip will advantage those who will master the political speech on wage increases, green transition, and the country’s dependence on foreign supplies. But the main question remains unsolved: how will the French-German partnership look like after the elections, and how will Macron withhold the projection of a strong France in this dual relationship? Unclear is also what stance the other French candidates will take when it comes to EU Affairs. What is clear is that, should Le Pen win, the French pro-EU approach will change dramatically, with the balance of power in the European Council being reshuffled, and consequently the European concerted approach in the European Council on Green Pass and vaccination being at risk.

Netherlands Mark Rutte to be confirmed as Prime Minister?

The Dutch parliamentary elections took place some time ago, on 17 March. The elections favored the liberal VVD, setting incumbent Prime Minister, Mark Rutte, on course for a 4th term, which could make him the Netherlands’ longest-serving Head of Government. The big surprise of the elections was the surge in support for the socially liberal Democrats 66 (D66) party. The pro-EU party claimed 24 seats, 5 more than during the last election in 2017.

However, as of today, a new government coalition is yet to be formed. On 5 October, it was announced that VVD, D66, CDA and ChristenUnie (CU) will explore a new government coalition, but at least 75 of the total 150 seats in the Lower House are needed to form a coalition. Therefore, several parties need to come together. Due to the fragmented political landscape and recent political scandals such as the Dutch childcare benefits scandal, this process might still take some time.

How will this likely impact the EU’s political landscape? VVD, as well as CDA and CU, hold a more Euro-pragmatic approach, while D66 is positioned as pro-EU. It is likely that D66 will steer the coalition into a more EU direction. And without any plans for the Recovery and Resilience Facility (RRF), there remains more room for negotiation among the parties than previous years. Even if the new coalition will remain on its liberal course, it cannot deny the urgent cross-cutting problems such as climate change and migration that will require an EU approach. Finally, with regards to incumbent Prime Minister, Mark Rutte, if his stay is confirmed, the Netherlands’ reputation of having a critical but accommodating stance in the European Union will remain.

Italy – a European candidate held back by its majority

Following an internal crisis for allocation of power, the former Prime Minister, Giuseppe Conte, resigned and the Head of State, because of lack of agreement among parties, handed the government to the former ECB President, Mario Draghi, in February 2020, instead of launching anticipated elections – after less than 2.5 years since the last political elections. Supported by a strong coalition encompassing all parties but the far-right Fratelli d’Italia, PM Draghi pledged his mandate to four priorities: health, work, EU Recovery Fund and sustainability, to be delivered by a governing team composed of ministries revived from previous governments.

In a time of needed European concertation for both the COVID-19 vaccination efforts and the effective use of the country-allocated EU Recovery Funds, Draghi is determined to reaffirm Italy’s contribution to the European project by fostering sustainable policies, digitalization, integration and, last but not least, a firm approach to introducing a mandatory Green Pass. His active involvement in the European Council’s discussions on integration and immigration, paired with his stance on stricter observance of the rules for a vaccination certificate to combat the COVID-19 diffusion, may propose a balance shift in the European Council, filling the power vacuum left by the German political fragmentation and the uncertain outcome of the French elections.

However, the strength of Draghi’s Cabinet might also mark its end. Indeed, the only obstacle to his power projection comes from the inside, as the right-wing Forza Italia and Lega Nord are slowly gaining confidence and questioning the integrity of the government on two key files: immigration and Green Pass. Should Draghi be able to hold the coalition tight, he’ll probably take Italy out of the COVID-19 economic setback and lead the way to pre-crisis levels for Italy and for Europe.

“Business Taxation for the 21st Century” communication and its impact on businesses

On 18 May, the European Commission published a new communication titled “Business Taxation for the 21st Century”. With this, the Commission presented its EU tax agenda for the short and long term, following the ambitious roadmap set out in the Tax Action Plan of the Fair and Simple Taxation Package, presented last summer.

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 info@dr2consultants.eu 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.

European Green Deal Impact Scan

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.

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Belgian National Recovery Plan: an analysis

Belgian National Recovery Plan: an analysis

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.

Belgian Public Affairs Training by Dr2 Academy - 3 June
Join Dr2 Consultants’ half-day online training on 3 June where we will also reflect on the priorities of the Belgian national recovery plan after the COVID-19 crisis.

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.

Greening mobility

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
  • Annex 2: Timeline of proposed digital projects
  • Annex 3: Timeline of proposed mobility projects

DOWNLOAD ALL ANNEXES HERE

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Next Generation EU and National Recovery Plans

Updated EU climate plans: opportunities for businesses at national level

Ambitious, achievable and beneficial for Europe” is how European Commission President, Ursula von der Leyen, characterized her updated EU climate plans. She unveiled her proposal to cut CO2 emissions by 55% by 2030 during her first State of the Union Speech on 16 September 2020. New measures to reach the objective will affect all sectors of the economy from transport, construction to energy. It accelerates the transition to a climate-neutral Europe by 2050, as laid down in the overarching European Green Deal. Therefore, the European Commission is also calling on Member States to step up their efforts. The updated climate targets on a European level provide a unique framework and opportunity for businesses to shape and be part of the green transition at national level.

Stepping up our climate efforts: “We can do it!”

The Commission based the increased 55% target on an assessment of the National Energy and Climate Plans for 2021-2030 (NECPs). The NECPs are ten-year plans, in which EU Member States outline how they will address climate-related issues such as energy efficiency, taking up renewables, reducing greenhouse gas emissions, interconnections and research & innovation. The evaluation of these national climate plans on EU-level showed that the EU is to surpass the current 40% reduction target, enabling the increase of the target to 55% by 2030. Or in Von der Leyen’s words: “we can do it!” As this demands a further increase of energy efficiency and the share of renewable energy, the Commission will present new proposals by June 2021:

  • The Renovation Wave: the renovation of public and private buildings to improve their energy efficiency;
  • Revision of the Energy Efficiency Directive: the alignment of the binding measures that limit energy consumption with the new climate targets;
  • Guidance for the Energy Efficiency First Principle: ensuring energy saving is a priority in policy-making and investment.

In addition to the EU-level evaluation of the National Energy and Climate Plans, the Commission will carry out an assessment of Member States’ individual plans in October 2020, as part of the State of the Energy Union Report, expected by the end of the year. The assessment will evaluate if Member States are on track to achieve the current 40% and proposed 55% emission reduction targets, looking at areas such as energy efficiency and the share of renewables in the national energy mix as mentioned above.

Opportunities to shape the national green recovery

Member States will have to bring their National Energy and Climate Plans in line with the new emission reduction target. Although the new objective may look challenging, combined with the Recovery and Resilience Facility, it offers a unique opportunity for businesses to become part of the green recovery in their countries. The Recovery and Resilience Facility is at the core of the Next Generation EU plan and offers an unprecedented €672.5 billion of loans and grants to Member States to emerge from the COVID-19 crisis. The budget is to be spent in line with the (increased) European climate ambitions. In order to benefit from the budget, Member States draft their national recovery plans outlining how these will contribute to criteria including environmental sustainability.

European Green Deal Impact Scan

As a result, a momentum arises for businesses to help national governments shape a sustainable recovery. Additionally, companies can benefit from European investment in the green ‘flagship areas’ that are to be included in the national plans. These focus areas include the development of renewables, energy efficiency of buildings and sustainable charging and refueling technologies for transport. With the Member States’ national recovery plans being submitted to the European Commission, now is the moment to roll up the sleeves and profit from the business opportunities stemming from the application of the plans.

Next steps

The Climate Law Regulation was proposed by the European Commission in March 2020. In a timely manner with the submission of the national recovery plans of the Member States, on 21 April 2021, the European Parliament and the Council reached a provisional agreement that increases the overall EU climate ambition and endorses a collective net greenhouse gas emissions reduction target of at least 55% by 2030 compared to 1990 – a substantial increase from the previous target of 40% reduction. The agreement prioritizes the emissions reductions over carbon removals for the 2030 target and calls on the Commission to set an intermediate climate target for 2040.

The agreement has yet to be officially approved by the Council and Parliament, before final adoption. The Commission will also follow up with a package of proposals aiming to revise and update all pieces of EU legislation related to climate and energy in order to ensure consistency and compliance with the new target. Next to that, the Commission will assess the 27 national recovery plans within the next two months, making sure that the Member States will earmark 37% of their funding to sustainable policies, setting the scene for achieving the Climate Law’s targets. Therefore, it is important to identify which business opportunities are embedded in the national plans and the overall EU climate strategy for companies. If you would like more information on the EU climate plans, or other files that could impact your business, contact Dr2 Consultants. Also, visit our Sustainability webpage for more information.

 

 

Next Generation EU and National Recovery Plans

On 27 May 2020, the European Commission proposed a temporary recovery instrument called Next Generation EU (NGEU), meant to address the unprecedented crisis caused by COVID-19. Currently, Member States are submitting their National Recovery and Resilience Plans on the basis of the European Commission’s recommendations. As of 30 April 2021, 14 national plans have been tabled, and the remaining 13 are expected to come within the next days and weeks.

Next Generation EU: The basics

The Next Generation EU is an envelope of €750 billion representing the largest stimulus package ever financed by the EU and is designed to boost the recovery of EU economy on the basis of two clear targets:

  • 37% for green investments and reforms. Each Member State will have to include a minimum of 37% of expenditure related to climate and other environmental objectives.
  • 20% for digital investments and reforms. Each Member State will have to include a minimum of 20% of expenditure to foster the digital transition.

To achieve the targets outlined above, the Member States had until 30 April 2021 to advance a National Recovery and Resilience Plan. Almost all Member States have worked hard to to set up their national recovery and resilience plans, with a constant activity following the guidance provided by the European Commission (I and II). The Member States also integrated their recovery and resilience plans with the annual national reform programs in line with the European Semester objectives.

Two concrete case examples in Belgium and Italy, which have already formulated their plans, provide a vivid example of current and future opportunities for businesses to profit in the sustainability sector.

European Green Deal Impact Scan

Dr2 Consultants is expertly placed to assist your company in identifying the opportunities in the National Recovery and Resilience Plans. Our expertise in sustainability and digital topics neatly overlaps with proposed activities at national and European level. Get in touch with us for more information.

National Recovery and Resilience Plans

Belgium

Regarding Next Generation EU in Belgium, the different governments have on 11 January 2021 found an agreement on the distribution of the allocated €5.9 billion from the Recovery and Resilience Facility between the federal and federated entities.

National Recovery Plan: Distribution of the allocated €5.9 billion from the Recovery and Resilience Facility between the federal and federated entities in Belgium

Distribution of the allocated €5.9 billion from the Recovery and Resilience Facility between the federal and federated entities in Belgium

Belgium officially submitted its National Recovery and Resilience Plan (‘Relance plan’) before the deadline of 30 April, which had to be agreed between the six different governments. However, it is clear that the plan will centre around six key themes:

  1. Climate, sustainability and innovation;
  2. Digital transformation;
  3. Mobility;
  4. Social issues and society;
  5. Economy of the future and productivity;
  6. Government finances.

Within the sustainability pillar, the plan will have a major focus on energy renovation of buildings, renewable energy sources, biodiversity and circular economy activities. A shortlist of potential projects can be found here. It is clear that within the first pillar, the focus lies very much on the renovation of existing buildings, the development of an economy based on hydrogen and other green gases, and the restoration of biodiversity. Belgian companies which are active in the above mentioned sectors are thus highly encouraged to seek close contact with the cabinet of Minister for Recovery, Thomas Dermine.

Italy

On 1 May 2021, the Italian Government has presented to the European Commission its Piano Nazionale di Ripresa e Resilienza (PNRR) which has a budget of €191.5 billion and outlines the trajectory that the country will follow to achieve the goals of Next Generation EU.

Based on 6 missions spanning from digitalization to green transition and mobility, the PNRR covers various projects to make Italy a more modern, more digital, more sustainable and more inclusive country. Mission 2 called “Green Revolution and Ecological Transition” is at the core of the plan, envisaging to earmark €59.3 billion to four components:

  1. Circular economy and sustainable agriculture;
  2. Renewable energy and sustainable mobility;
  3. Energy efficiency and building requalification;
  4. Protection of territory and water resources.

Mission 2 is predominantly oriented towards the pursuit of environmental sustainability, but it also has considerable digitization content. The investment actions will be accompanied by specific reforms aimed at promoting the energy transition and the use of renewable sources, providing the necessary infrastructure for their integration into the national electricity system. The largest amount of investments is dedicated to heading 2, with allocations for rapid mass transport and a new generation of vehicles for local public transport. The ultimate aim is to achieve the overall EU decarbonization targets, which envisage a fleet of 6 million electrical vehicles by 2030. Local authorities and businesses will be a key player in implementing this line of action.

The interventions will be consistent with the European Circular Economy Action Plan, with the aim of reducing the net production of waste and the landfill of all processed waste, and will ultimately contribute to the achievement of the EU climate objectives, made even more challenging by the provisional agreement reached by the European Parliament and the Council on the Climate Law proposal on 21 April 2021, which targets a collective net greenhouse emission reduction of at least 55% by 2030 in comparison to 1990.

The Government will also publish a governance model that identifies responsibilities for its implementation, ensures coordination with relevant ministers and monitors progress on spending.

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Updated EU climate plans: opportunities for businesses at national level

 

 

Lobbying in Brussels: why and how?

Brussels is not only the capital of Belgium, but also the heart of European democracy and lobbying. In fact, in an area of a few square kilometers, the Belgian city gathers the headquarters of the main EU institutions and dozens of other EU entities.

In recent years, the inherently global dimension of challenges such as climate change, digitalization or global health pandemics, requires an approach that goes beyond national borders. Consequently, political powers and competences are shifting from Member States towards the EU institutions. With legislation ranging from artificial intelligence to trade policy and energy taxation being proposed, discussed and approved in the EU institutions, the business operations and day-to-day activities of millions of European citizens and companies are increasingly turning around Brussels.

The EU powers have a strong impact on the laws and policies that determine business operations in a wide variety of sectors. That is why having a presence in Brussels is of growing importance in order to make sure your voice is heard when drafting future legislation. In this blog post, Dr2 Consultants outlines three key recommendations for effectively developing a successful lobby in Brussels.

How to lobby in Brussels: key recommendations

1. Matching your message with the EU narrative

Lobbying is the indispensable bridge linking a sector of the economy (industry, trade and many others) with EU stakeholders in Brussels. A good lobbyist provides technical expertise to EU legislators and regulators to demonstrate the impact of an anticipated legislative proposal, or provide arguments, facts & figures that can better match the legislative act with the specific industry interests. One of the best ways to achieve this goal is to submit positions to public consultations or set up meetings with EU stakeholders, but finding the loopholes in the EU procedures is essential to make sure you get your message across at the right time. In addition, a carefully crafted storyline and set of policy messages that match the EU narrative will make a difference.

Public Affairs Trainings by Dr2 Academy - Request a proposal

Dr2 Consultants has built up an extensive experience in designing storylines, crafting policy messages, that align with the EU public policy discourse, and helping its clients assert their position in the EU legislative process. Our international team constantly monitors political changes and advises a broad range of clients, from transport to sustainability and digital, in order to identify threats and opportunities in the draft EU legislation.

2. Building a network to access policymakers

Once the storyline and messages are developed, a point of access to EU policymakers has to be found in order to pass the message through. First of all, an effective lobby starts from a strong network in Brussels, both with policymakers, legislators and industry partners. Dr2 Consultants is expertly placed to set up the right connections and pave your way in the ‘EU bubble’.

Conveying your messages to EU stakeholders requires constant attention. For example, the inter-institutional trialogue negotiations are designed to speed-up the decision-making procedure and reconcile the positions of the European Parliament and Council of the EU. Although these informal negotiations are considered to be effective, they lack transparency as the negotiations take place behind closed doors. In these situations, it is of great value to have a strong network that can provide you with the latest intelligence or that will enable you to convey your message during crunch time.

Dr2 Consultants excels an outstanding network of policymakers and their offices, corporations and trade associations who acknowledge our expertise and are willing to provide us with behind-the-scenes intelligence. The mutual trust within our established network allows us to draw knowledge from different sources, enabling us to access the key players during the different phases of EU procedures.

3. Building coalitions

Another key element for a successful lobbying strategy in Brussels is having effective collaboration frameworks in place. Today, the Belgian capital crawls with associations, industry representatives and institutions that voice different needs and put forward various interests. A way to capitalize on this maze is to build coalitions and cooperate with other stakeholders on issues of common interest. Issue-driven policy actions often exert a higher leverage on policymakers and regulators due to the wide support they have on their back. Over the last years, Dr2 Consultants has built up a track record in surfing through the plethora of interest representatives and establishing the right coalitions.

EU institutions are keen on engaging with sector representatives and joint consortia that voice a single position stemming from different sector segments. If you want to successfully lobby on a legislative text in Brussels, you must be aware of which association/representative you can reach out to and what collaboration you can set up. Moreover, a constant contact with the constellation of networks will keep your organization be visible and up to speed with potential coalitions forming in Brussels.How to lobby in Brussels: key recommendations

Lobbying in Brussels made easy with the help of Dr2 Academy

Being proactive, timely and aware of what is needed to effectively influence policymaking is the key output of Dr2 Consultants’ training modules, which are embedded in the Dr2 Academy and aimed at empowering participants, spanning from local authorities to in-house and institutional representatives, with the right tools to carry out successful lobbying activities and advocacy strategies at EU and national level. Get in touch if you would like to know what we can do for your organization.

Would you like to influence EU legislation, attract EU funding, establish a network of key policymakers, or simply stay informed about the latest developments in your industry? Feel free to reach out and discuss opportunities over a (virtual) coffee.

Visit Dr2 Academy webpage

EU Artificial Intelligence Regulation: how will it affect the tech sector?

The European Commission presented on 21 April its Proposal for a Regulation on a European Approach for Artificial Intelligence. This EU Artificial Intelligence Regulation, a key element of the 2020 Strategy on Europe’s Digital Future, aims at creating the first-ever legal framework for artificial intelligence, fostering innovation, and maximizing the societal benefits of AI while ensuring the safety of EU citizens by guaranteeing the trustworthiness of AI systems. This article briefly presents measures included in the proposal and provides Dr2 Consultants’ analysis of the potential impact on the tech sector.

Ensuring the safety and trustworthiness of artificial intelligence systems

To ensure the safety and trustworthiness of artificial intelligence systems and applications put on the European market, the European Commission adopted a risk-based approach in its proposal. Depending on the risk posed by a system or its application, different conditions will apply.

Unacceptable risk

The proposal for an EU Artificial Intelligence Regulation lists a number of AI systems or applications that pose an unacceptable risk to the safety, livelihood and rights of people, and that are banned altogether from being commercialized in the EU. Those notably include AI systems or applications manipulating human behavior to circumvent users’ free will, but the wording used by the Commission seems vague and it is unclear how systems will be assessed to determine whether they fall into the banned category.

It also concerns AI systems or applications allowing social scoring by governments (directly targeting systems already introduced in China), and real-time biometric recognition systems used by law enforcement, unless their use is necessary in certain specific cases (such kidnapping, terrorist attack or criminal search).

EU Artificial Intelligence Regulation - Unacceptable Risk

High-Risk

One step down on the risk scale, the proposal lists artificial intelligence systems with “high-risk” use, which are systems with a variety of sensitive applications, from transport (such as self-driving vehicles), to essential private and public services (such as credit scoring) to education (e.g. exam scoring). The proposal also targets public applications of AI, especially in the fields of law enforcement, migration and border control management, and administration of justice.

High-risk systems will be allowed to be commercialized and used in the EU only after complying with conformity assessment procedures, to ensure that the systems or their application respect the EU standards. Although the proposal plans for national authorities to conduct checks to ensure that systems are compliant, the text still intends for many applications to be evaluated through self-assessment, meaning that the AI providers will assess themselves if they meet the conformity criteria set by the EU. Those criteria notably include: having in place adequate risk assessment and mitigation systems, using high quality datasets to avoid algorithmic bias, and ensuring appropriate human oversight. This flexibility is likely to be positively welcomed by the tech industry, but MEPs have already warned that they would support stricter compliance rules.

EU-Artificial-Intelligence-Regulation-High-Risk

Limited and minimal risk

Systems that do not fall under the “unacceptable” or “high-risk” categories are considered of limited or minimal risk, which covers the majority of artificial intelligence systems widely used in the EU at the moment. AI systems of limited risk will need to respect transparency obligations, meaning that users must be informed that they are interacting with an AI system. Systems posing minimal risks, such as spam filters or AI-enabled video games, can be commercialized and used freely.

The application of the EU Artificial Intelligence Regulation will be overseen by a newly-created body, the European Artificial Intelligence Board.

Download AI Regulation Infographic

Fostering European excellence in artificial intelligence

Next to measures to secure AI systems, the proposal also includes a few measures to promote innovation in AI in the EU. The Artificial Intelligence Regulation notably includes an update of the 2018 Coordinated Plan on AI, which sets out a series of actions to be taken by EU Member States and provides funding instruments, financed by the Digital Europe, Horizon Europe and Cohesion programmes, to accelerate investments in AI.

The proposal also targets SMEs to facilitate their access to testing and experimentation facilities as well as digital innovation hubs.

Next steps for the EU Artificial Intelligence Regulation and potential impact on the tech sector

The European Parliament and the Council of the EU, representing Member States, will now both study the proposal and adopt their respective positions, before entering into negotiations. The negotiations are likely to be stormy, considering their diverging positions. Indeed, MEPs support even stricter rules, notably promoting additional applications to fall under the banned category. On the other hand, it can be expected that Member States will adopt a position demanding more leeway on security and law enforcement applications, especially considering that national security remains a national prerogative of Member States.

As the proposal is likely to be reworded and amended during the negotiation process, the impact it will have on the tech sector is not easy to evaluate. However, if the proposal were to be accepted as is, the first impact for the tech sector would be that companies commercializing banned AI systems, or putting on the market high-risk systems that have not gone through the conformity assessment procedure, could be subject to financial penalties of 6% of the company’s total annual turnover. Considering the vague wording used by the Commission, it is difficult to understand how this law will be practically enforced.

There is also a worry from the industry side that this regulation will overburden a sector composed mainly of SMEs and start-ups, without a sufficient support framework to create balance, considering that measures included in the proposal to support innovation remain limited.

There is a strong interest of big tech companies in AI technologies and systems developed by small startups. In the past five years, big tech companies have purchased over 60 AI startups creating systems that can improve products created by the tech giants.

It remains to be seen how this new Artificial Intelligence Regulation introduced by the EU will affect the AI landscape. Will the measures to foster innovation and support SMEs lead to a multiplication of actors or will the additional regulatory burdens created by the regulation burden startups too much, leaving room only for bigger companies?

Moreover, a risk exists that, as it happened with the General Data Protection Regulation (2016), the implementation and enforcement of the European Artificial Intelligence Regulation at national level will be fragmented, leaving the industry to deal with disparities between Member States and an uncertain legal framework that would hamper the EU Single Market and the economy.

Dr2 Consultants continuously monitors the developments in the discussion on artificial intelligence and supports its clients on these matters. Should you be interested in further information on the AI Regulation and how it could impact your business, you can reach out to Dr2 Consultants at info@dr2consultants.eu or find more information on our website.

EU road safety policy: state of play and vision for 2030

On 20 April, the EU Road Safety Results Conference took place, during which the newest traffic fatalities numbers from the EU Member States were presented. In 2020, almost 19.000 people lost their lives on European roads, which is a 17% reduction compared to 2019. This was not entirely in line with the decrease in traffic due to the pandemic. Between 2010 and 2020 fatalities fell by 36% across the EU, meaning that European roads are still the safest in the world, with 42 road deaths per 1 million inhabitants.

However, progress has been slowing down for several years now, and the road safety numbers are nowhere near the desired targets for 2030 and 2050. Additionally, the disparity in road injuries and deaths between EU Member States remains big. Where the roads of Scandinavian countries such as Sweden and Denmark are among the safest on the continent, countries like Romania, Slovakia or Slovenia still bear a higher share of road fatalities.

These developments raise the question if current EU road safety policy measures are sufficient and effective. What initiatives are currently in the EU pipeline to bring the number of serious traffic accidents down, and what are the different aspects influencing the number of injuries and deaths? Dr2 Consultants’ Transport Team outlines what legislative initiatives relevant for companies and end-users in the road transport sector the EU is expected to table. Innovative solutions will be needed to further bring down the number of fatalities on European roads, which will both put additional responsibilities on both road users as well as providers of transport services.

Looking ahead: “Vision Zero”

Currently, the European institutions are working together with several international organizations to achieve ‘Vision Zero’. Vision Zero is a strategy to eliminate all traffic fatalities and severe injuries, while increasing safe, healthy and equitable mobility for all by 2050 inter alia through policies that stimulate the use of new technologies that enhance road safety.

To combat the stagnation of the reduction of the number of road deaths, and ensure that the EU maintains its leading position in the world in terms of road safety, Commissioner for Transport, Adina Vălean, highlighted several areas of attention during the Road Safety Results Conference:

  • Considering an urban mobility initiative which includes safety at all stages of mobility and urban planning. This initiative should also address the fast roll-out of micro-mobility devices throughout European cities, leading to road safety challenges;
  • Taking action to reduce speeding and alcohol consumption through further use of EU recommendations;
  • Developing and stimulating the uptake of innovative solutions, for example systems detecting weaker road users and advanced driver-assistance systems.

More will become known on these initiatives in the coming months, of which Dr2 Consultants is expecting it will influence road transport for years to come. Therefore, it is essential to gather the latest information through contact with EU institutions in Brussels. Learn more about how our monitoring services can help you stay up to date on relevant EU legislative initiatives here.

Adina Ioana Vălean - European Commissioner for Transport
Adina Ioana Vălean | European Commissioner for Transport   © European Union, 2019

One of the most prominent pieces of EU legislation safeguarding road safety, also mentioned by Commissioner Vălean during her conference keynote, is the Directive on Driving Licenses. The Directive, laying down specifications for mandatory theory tests, medical tests for professional drivers, and qualification and training of driving examiners, will be subject to a revision process starting end of this year with an eventual proposal expected by the end of 2022. Moreover, the Commission will revise the Directive on cross-border enforcement of traffic rules, come up with new guidance on blood alcohol content and the potential use of alcohol interlocks, and adapt the eCall Framework to new technologies (expected at the end of 2021, or early 2022).

In 2020, the transport committee (TRAN) of the European Parliament also started working on its own recommendations to further improve EU road safety, tackling the number of fatalities on European roads. In its draft report, the committee states inter alia that Member States and cities should consider bringing down speed limits from 50km/h to 30km/h, making EU funding available to increase road safety in countries such as Romania and Slovakia, and further incorporating (digital) advanced safety features such as intelligent speed assistance and emergency lane keeping systems as mandatory instruments in new vehicles. Apart from the increased safety that could be achieved for individual drivers, road transport companies and manufacturers of heavy-duty vehicles will have to look out for additional obligations to improve road safety in the upcoming years.

However, as traffic management and road safety are still Member State competences, it is questionable if the European Parliament and European Commission can realistically achieve Vision Zero by 2050. In the coming years both EU institutions will aim to integrate road safety in all of their proposed legislation, including the latest trends in mobility (new forms of mobility, driver-assistance systems, etc.), but ultimately the responsibility and initiative will be with the Member States to make a dent in the traffic fatality numbers.

For stakeholders it will be crucial to remain in an open dialogue with both EU institutions as well as Member States. Providers of innovative solutions for transport will have to ensure that the costs of conforming to EU policy do not weigh a too heavy burden on the business model. On the other hand, EU Member States remain strongly in the lead in the national implementation of policy for all modes of transport.

What can Dr2 Consultants do for you?

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. Feel free to reach out to discuss opportunities and threats in the upcoming legislation related to EU road safety for your company or organization with us over a virtual coffee. Visit our transport sector webpage for more information.

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Smart mobility within cities: benefits and challenges