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  • Author: Thomas G. Mahnken, Grace B. Kim
  • Publication Date: 01-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: On NATO’s entire Eastern and South-Eastern flank, the Allies face a major, pressing and subtle challenge. Using sub-conventional grey zone tactics, Moscow has repeatedly tried, and at times succeeded, in expanding its influence, eroding international norms, undermining the rules-based in- ternational order, and shifting the balance of power in its favour. Preventing Russia from launching such op- portunistic acts of aggression is particularly import- ant because its armed forces are developing the ability to attack quickly – under the cover of increasingly capable defences – countries on their periphery in a clear effort to impose a fait accompli.1 NATO countries are at a particular disadvantage in this type of compe- tition. Their force structures consist of expensive and technologically complex information-gathering platforms, such as satellites and manned aircraft, which due to their high costs are also scarce and employed with reluctance by states who generally hesitate to put them in harm’s way. Additionally, the prohibitively high cost of these platforms deters some countries from investing in these types of capabilities. As debates within NATO about cash, capabilities and contributions continue to hold the stage, highlighting Allies’ needs for different types of capabilities – less expensive, more resilient, and relatively more disposable – is important.2 Equal- ly critical is the need for Allies to develop new concepts of operations as well as new organi-zations to employ them effectively. The solution may not involve fielding exotic new capabilities so much as employing existing ones in innovative ways. It will also benefit greatly from approaches that allow Allies and partners to participate fully. If we do not adapt, we risk being surprised by potentially catastrophic events in a future conflict.
  • Topic: NATO, Diplomacy, Regional Cooperation, Military Strategy, Surveillance
  • Political Geography: Europe, North Atlantic, Eastern Europe, North America, Southern Europe
  • Author: Olivier Rittimann
  • Publication Date: 01-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: What is commonly known as the “Ber- lin Plus” arrangements, signed in March 2003, provides for the European Union (EU) to draw upon NATO’s assets and capabilities for operations in which the Alliance would not be militarily involved. Following lengthy delays incurred by the Cyprus question, it was only as of 2003 that the agreement was successfully implemented with the transfer of operations from NATO to the EU in both the former Yugoslav Republic of Macedonia (2003) and then in Bosnia-Herzegovina (2004). The Berlin Plus agreement guarantees EU access to NATO planning capabilities, which contribute to EU- led military operations through the identification of command options, procedures for release and recall of NATO assets and capabilities, and the exchange of classified intelligence under reciprocal security protection rules. At the end of the conflicts in the former Yugoslavia (1999), the EU had no defence staff fit to plan nor conduct an operation, and it is only fifteen years ago that member states established national Operation Headquarters (OHQ), which nations make available for EU operations, as was done in 2006 in the Demo- cratic Republic of Congo and in 2007 in Chad. At the end of the 1990s, the Berlin Plus proposal made em- inent sense: it prevented any duplication (by the EU) of assets and fostered the emergence of a European operational culture. But is the Arrangement still fit for purpose almost 20 years later?
  • Topic: NATO, Diplomacy, Regional Cooperation, Military Strategy
  • Political Geography: Europe, North Atlantic, North America
  • Author: Andris Banka
  • Publication Date: 02-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: In recent years NATO has markedly increased its presence in the Baltic states. Relatively “light”, yet highly diverse multinational forces have been placed across the Alliance’s frontline with an underly- ing objective: to deter Russia. In this effort, the United States has served as a critical ballast. The Pentagon has directed sophisticated military exercises and rotated US service members throughout the region. These mea- sures, however, often did not align with US President Donald Trump’s spoken words nor written tweets. This obvious dichotomy disoriented Allied governments and shook bedrock assumptions about US security commitments. As political power changes hands in Washington, this lends an opportunity for a retooling of the transatlantic partnership. Domestically, incoming US President Joe Biden ran on the platform “Build Back Better”. In the spirit of that slogan, this Policy Brief lays out policy cor- rectives that both sides of the Atlantic could pursue to strengthen the US-Baltic security link.
  • Topic: Security, Defense Policy, NATO, Diplomacy, Regional Cooperation, Military Strategy
  • Political Geography: Europe, North Atlantic, North America
  • Author: Marcin Zaborowski
  • Publication Date: 02-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: The post-Cold War enlargements have changed the Alliance, its geopolitics and the definition of its purpose, which is no longer limited to deterring against threats to Allies’ territory. Enlarge- ments have also redefined the security and defence policies of the new member states, by transforming their armed forces, civil military relationships and im- pacting their defence industries. The states that joined NATO since 1989 are usually categorized as Central Europe or Central and East- ern Europe. Within this Central European realm of new member states, one can distinguish between the North-East, the Centre, the South-East, and the West- ern Balkans. All states in these groupings were com- munist prior to the end of the Cold War. Today, with the Cold War fast becoming a faded memory, Central Europeans tend to define their security needs with in- creasing divergence, with major repercussions on their defence policies, in spite of their belonging to the same Alliance. This Policy Brief maps out Central Europe by identifying groups of states in the region and looking at defence policy divergences. It focuses on a number of indicators, such as defence spending, acquisition of defence equipment and attitudes towards hosting for- eign NATO troops on their soil.
  • Topic: Defense Policy, NATO, Regional Cooperation, Military Strategy, Post Cold War
  • Political Geography: Europe, North Atlantic, North America
  • Author: Heather A Conley
  • Publication Date: 03-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: The 1949 Washington Treaty is a remarkably brief document consisting of a preamble and 14 articles. The Treaty describes only the po- litical commitments and obligations of the signato- ries. It does not articulate a requirement for NATO members to spend a certain amount of their Gross Domestic Product (GDP) on defense nor does it specify the military capabilities that a NATO member must possess to defend the Alliance. From 1949 to the collapse of the Soviet Union, NATO was the singular locus of geopolitical discus- sion between North America and Europe. These were not easy discussions, yet the Alliance weathered strident policy and geopolitical policy differences. NATO also endured its members temporarily ceasing to be democracies due to military coups or concern about Communist influence on NATO governments. With a political body standing on the shoulders of a credible military deterrence, Allies were able to deploy creative problem-solving skills to bridge political dif- ferences, such as the policy innovation of deterrence and détente, while pursuing other, quieter methods, such as the temporary suspension of sharing sensitive intelligence from compromised NATO governments. Unfortunately, NATO’s centrality as a political forum greatly diminished after the Cold War as the Alliance reduced its political consultations in a less demanding geopolitical environment. Despite occa- sional interruptions of intense political discussion re- lated to conflict in the Balkans and the September 11th attacks, US retrenchment, combined with Europe’s inward focus, minimized NATO as a political forum. NATO was increasingly consumed by tactical decisions on out-of-area operations and transatlantic policy divisions over the Iraq War which fueled both Europe’s desire for greater autonomy and America’s questioning of the military utility of its Allies. NATO leaders substituted tactical – albeit important – military decisions regard- ing troop contributions, placement, and caveats as a substitute for political discussion. This political drift has now become so great that NATO members have begun to withhold support for the defensive planning of other Allies and new disputes between NATO members have the potential to escalate.
  • Topic: Defense Policy, NATO, Regional Cooperation, Military Strategy, Grand Strategy
  • Political Geography: Europe, North Atlantic, North America
  • Author: Michael Clarke
  • Publication Date: 03-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: NATO has always been an important player in global politics. It is in the nature of the Alli- ance that its essential military missions were always carefully defined and its geographical boundar- ies strictly set by the collective defence commitments among its members. Nevertheless, NATO’s role as a politico-military institution among the great powers of the Cold War ensured it would always be global- ly significant. It could not have been otherwise. This remains as much the case – though now in different ways – as we consider the international environment taking shape for the 2030s. In this new environment the unavoidable global responsibilities of being a regional military alliance can be summarised in three ways; looking at NATO’s role in helping western powers defend their wider interests in the multi-polar world; helping meet the pseudo-ideological challenges posed by the rise of autocracies; and contributing to issues of the “global commons”.
  • Topic: Defense Policy, NATO, Regional Cooperation, Military Strategy, Leadership
  • Political Geography: Europe, North Atlantic, North America
  • Author: Olivier Roy
  • Publication Date: 04-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: Any counter-terrorist policy should be shaped according to the nature of the threat. For an alliance like NATO, it is particularly import- ant to distinguish the fundamental characteristics of global movements from local terrorist entities. Whilst global jihadi propaganda and Islamist ideology still represent a significant danger, in many instances, it is the local dynamics that prevail. Complex NATO operations – designed to prevent, stabilize or rebuild – must be framed and designed accordingly.
  • Topic: Defense Policy, NATO, Globalization, Regional Cooperation, Terrorism, Military Strategy, Radicalization, Local, Jihad
  • Political Geography: Europe, North Atlantic, North America
  • Author: Andrea Gilli
  • Publication Date: 05-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: Under the guidance of the Secretary General Jens Stoltenberg, in 2020 NATO embarked on a reflection process aimed at equipping the Alliance for the challenges of 2030.1 Composed of several parts, actors and phases, the process ul- timately aims to make NATO more relevant in the years ahead when technological disruption, climate change, competition among Great Powers and vio- lent non-state actors will pose new and major threats. Ideas, proposals, and recommendations are coming in from within and from outside the Alliance. Inter- estingly, among the recommendations, several voices have called for NATO to expand its net assessment capabilities.2 For most observers, even in the security and defence world, net assessment is an esoteric word. While many may have heard of Andrew Marshall and the US Department of Defense’s Office of Net As- sessment, most would probably struggle to define the term. This Policy Brief provides a short introduction to the topic: what is net assessment, how and why has it emerged, how reliable is it and how could NATO use it?
  • Topic: Defense Policy, NATO, Regional Cooperation, Military Strategy, Leadership
  • Political Geography: Europe, North Atlantic, North America
  • Author: Niccolo Petrelli
  • Publication Date: 05-2021
  • Content Type: Policy Brief
  • Institution: NATO Defense College
  • Abstract: In late 2020, analysts recommended for the first time the establishment within NATO of a net assessment (NA) capability to deal with an in- creasingly complex strategic environment.1 The same recommendation was reiterated in the NATO 2030 report to address the problem of “strategic simultane- ity”: i.e. the emergence of multiple, simultaneous and interconnected threats. According to the Reflection Group appointed by the Secretary General, “NATO should consider creating a new net assessment office [...] with the mission of examining NATO’s strate- gic environment on the basis of agreed threats and challenges across the whole spectrum of military and non-military tools. [...] A net assessment function [...] would bring a systematic methodology distinct from horizon scanning. It would exist to analyse the organisation’s strengths and options [...]”.2 The term NA was first coined in the US during the early 1970s by national security official Andrew W. Marshall to refer to a constellation of concepts and techniques for evaluating relative power. In West- ern usage, however, and for some decades now, it has been employed in a broader sense to denote the function of combining the appreciation of one’s own strength against that of one’s opponents in interna- tional affairs at the highest level.
  • Topic: NATO, Regional Cooperation, Military Strategy, Grand Strategy
  • Political Geography: Europe, North Atlantic, North America
  • Author: Gary Clyde Hufbauer
  • Publication Date: 03-2021
  • Content Type: Policy Brief
  • Institution: Peterson Institute for International Economics
  • Abstract: Open Sub-navigation BackOpen Sub-navigation Publications Back Policy Briefs Working Papers Books PIIE Briefings Open Sub-navigation Commentary Back Op-Eds Testimonies Speeches and Papers Topics & Regions PIIE Charts What Is Globalization? Educational Resources Open Sub-navigation Back Senior Research Staff Research Analysts Trade Talks Open Sub-navigation Back RealTime Economic Issues Watch Trade & Investment Policy Watch China Economic Watch North Korea: Witness to Transformation 中文 Open Sub-navigation Back All Events Financial Statements Global Connections Global Economic Prospects Stavros Niarchos Foundation Lectures Trade Winds Open Sub-navigation Back News Releases Multimedia Media Center Open Sub-navigation Back Board of Directors Staff Employment Contact Annual Report Transparency Policy POLICY BRIEF VIEW SHARING OPTIONS Will industrial and agricultural subsidies ever be reformed? Gary Clyde Hufbauer (PIIE) Policy Brief21-5 March 2021 Photo Credit: REUTERS/Denis Balibouse One economic argument for government subsidies is that they are necessary to compensate firms and industries for benefits they provide to society at large but cannot capture in the prices they charge for goods or services. For example, subsidies to renewable energy are defended because renewable energy limits carbon emissions. When a major economy subsidizes extensively, however, its trading partners are drawn into the game, with losses all around. As the prisoner’s dilemma suggests, a better outcome would entail mutual restraint. But the goal of mutual restraint is no less difficult in international trade than it is in international arms control. Both the European Union and the US federal system try, in different ways, to regulate industrial subsidies. Hufbauer examines efforts to contain unjustifiable subsidies and proposes modest improvements, bearing in mind that as countries struggle to overcome the global economic downturn resulting from the COVID-19 pandemic, there is little appetite for restoring a free market economy—one in which firms compete with minimum government assistance or regulation. Selective upgrading of the rulebook may nevertheless be possible.
  • Topic: Agriculture, Government, Reform, European Union, Regulation, Manufacturing, Industry, COVID-19, Subsidies
  • Political Geography: Europe, North America, United States of America
  • Author: Dennis Ross
  • Publication Date: 01-2021
  • Content Type: Policy Brief
  • Institution: The Washington Institute for Near East Policy
  • Abstract: A reimagined approach to Iran nuclear talks could extend the country’s breakout time, preserve U.S. negotiating leverage, and strengthen American alliances in Europe and across the Middle East. In the first in a series of TRANSITION 2021 memos examining policy challenges across the Middle East, esteemed diplomat and policymaker Dennis Ross provides an innovative approach to reengaging Iran in nuclear diplomacy. His ideas have the potential to extend Iran’s breakout time, preserve U.S. negotiating leverage, and strengthen U.S. alliances in Europe and across the Middle East. Ross explains: “If regime change is not a realistic or advisable goal, the objective must be one of changing the Islamic Republic’s behavior. While this would be difficult, history shows that the regime will make tactical adjustments with strategic consequences when it considers the price of its policies to be too high.” In the coming weeks, TRANSITION 2021 memos by Washington Institute experts will address the broad array of issues facing the Biden-Harris administration in the Middle East. These range from thematic issues, such as the region’s strategic position in the context of Great Power competition and how to most effectively elevate human rights and democracy in Middle East policy, to more discrete topics, from Arab-Israel peace diplomacy to Red Sea security to challenges and opportunities in northwest Africa. Taken as a whole, this series of memos will present a comprehensive approach for advancing U.S. interests in security and peace in this vital but volatile region.
  • Topic: Foreign Policy, Diplomacy, Nuclear Power, Joe Biden
  • Political Geography: Europe, Iran, Middle East, Israel, Palestine, North America, United States of America
  • Author: Catherine Turner, Aisling Swaine
  • Publication Date: 06-2021
  • Content Type: Policy Brief
  • Institution: International Peace Institute
  • Abstract: The protection of women in armed conflict and their participation in peace and security activities are central pillars of the women, peace, and security (WPS) agenda. Overall, however, the WPS agenda has overlooked the relationship between participation and protection. This perpetuates a false binary between the participation of women as leaders with agency and the protection of women as victims of conflict. It also misses the gendered, context-specific, and conflict-related protection risks that accompany women’s participation. Finally, it overlooks the critical link between the harms women experience and their low levels of representation. This paper considers the intersection between women’s participation and protection in the context of Northern Ireland. While often assumed to be free of “global policy” concerns such as WPS, Northern Ireland starkly illustrates the intrinsic connections and tensions between women’s leadership and protection in conflict and post-conflict situations. After providing an overview of these connections and tensions more broadly, this paper examines the participation and protection of women in Northern Ireland since the 1998 Good Friday Agreement. It draws from twenty-five semi-structured interviews with women in leadership positions in Northern Ireland. The paper concludes that gender inequalities and gendered insecurities intersect with sectarianism, the legacy of violence, and political crises arising from power-sharing arrangements under the peace agreement. These, in turn, intersect with emerging technologies such as social media to stymy women’s participation across all areas of post-conflict political life. While these findings underscore the continued relevance of the WPS agenda, they also signify that deeper engagement with gendered protection issues is required if the agenda is to substantively advance women’s equality and participation in the longer term.
  • Topic: Security, Gender Issues, Women, Peace
  • Political Geography: Europe, Northern Ireland
  • Author: Ben McWilliams, Georg Zachmann
  • Publication Date: 07-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: Many of the technologies that can help the European Union become a net-zero emissions economy by 2050 have been shown to work but are not yet commercially competitive with incumbent fossil-fuel technologies. There is not enough private investment to drive the deployment of new low-carbon alternatives. This is primarily because carbon prices are neither high enough nor stable. There are a number of benefits from the deployment of low-carbon technologies that private firms do not factor in. These include the benefits of decreasing industry-wide costs over time, and the global climate benefits from the development of low-carbon technologies within the EU that can subsequently be exported. The result is an investment level below the socially optimal value in the EU. Commercialisation contracts could be implemented as a temporary measure to remove the risk associated with uncertain carbon prices for ambitious low-carbon projects. The aim of the contracts would be to increase private investment to the socially optimal level. Contracts would be allocated through auctions in which fixed prices for abated emissions over a fixed duration would be agreed on a project-by-project basis. On an annual basis, public subsidies amounting to the difference between the agreed carbon price and the actual EU carbon price would be provided to investors, depending on the total carbon emissions abated. As long as EU carbon prices are low, investors would receive larger subsidies to ensure their competitiveness. Contracts would be auctioned at EU level. This would generate increased competition compared to national auctions, leading to more efficient outcomes and preventing fragmentation of the single market. From about €3 billion to €6 billion would be provided to the main industrial emitting sectors annually, with the amount reducing as the EU carbon price rises and low-carbon technologies become competitive without subsidy.
  • Topic: Climate Change, Energy Policy, Science and Technology, Investment, Trade, Carbon Emissions, Decarbonization
  • Political Geography: Europe
  • Author: Maria Demertzis, Marta Dominguez-Jimenez, Lionel Guetta-Jeanrenaud
  • Publication Date: 06-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: The European Union’s capital markets remain very underdeveloped compared to the United States. The market for equity, as measured as the size of the total market capitalisation of listed domestic firms relative to GDP, is much larger in the US and in Japan than in Europe.
  • Topic: European Union, GDP, Capital Flows
  • Political Geography: Japan, Europe, United States of America
  • Author: Monika Grzegorczyk, Mario Mariniello, Laura Nurski, Tom Schraepen
  • Publication Date: 06-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: The pandemic has shown that many workers can efficiently work remotely, with benefits for wellbeing and even productivity. The European Union should develop a framework to facilitate hybrid work.
  • Topic: European Union, Work Culture, Innovation, Strategic Competition, Pandemic, COVID-19
  • Political Geography: Europe, Global Focus
  • Author: Gregory Claeys, Zsolt Darvas, Maria Demertzis, Guntram B. Wolff
  • Publication Date: 05-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: The COVID-19 pandemic has led to the biggest global recession since the Second World War. Forecasts show the European Union underperforming economically relative to the United States and China during 2019-2023. Southern European countries have been particularly strongly affected. While the ICT sector has benefitted from the COVID-19 crisis, tourism, travel and services have suffered. Business insolvencies have, paradoxically, fallen. While total employment has almost recovered, the young and those with low-level qualifications have suffered employment losses. Inequality could rise. The pandemic may lead to medium to long-term changes in the economy, with more teleworking, possibly higher productivity growth and changed consumer behaviour. Policymakers must act to prevent lasting divergence within the EU and to prevent scarring from the fallout from the pandemic. The first priority is tackling the global health emergency. Second, we warn against premature fiscal tightening and recommend instead additional short-term support from national budgets. Over the medium term, fiscal policymakers will need to gradually move away from supporting companies through subsidies, towards tax incentives for corporate investment. A review of the European fiscal framework is needed to achieve the EU’s green goals more rapidly. The quality of public finances, how policymakers spend resources and the associated reforms are of central importance to prevent scarring. Improving the efficiency of insolvency procedures will be crucial for speedy and effective recovery. Targeted labour market policies for the young and less-qualified are needed. As teleworking becomes a more permanent feature of the EU’s labour markets, it will be crucial to adapt social security and taxation systems in the context of the single market for labour. The EU should resist protectionist calls in the wake of the pandemic. Rigorous competition policy enforcement and an integrated EU market have been beneficial for European convergence and growth. Capital markets have an important role to play in a speedy recovery.
  • Topic: Governance, European Union, Inequality, COVID-19
  • Political Geography: Europe
  • Author: Uri Dadush, Pauline Weil
  • Publication Date: 05-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: Despite tensions over China’s discriminatory business practices, China’s trade continues to thrive, and the country has taken over from the United States as the first destination for foreign investment. American and European businesses continue to be engaged in China’s large and growing market, even amid a trade war between China and the United States. Drawing on surveys of companies and international comparisons, we show that – contrary to the prevailing narrative – China’s business practices have improved significantly in recent years. China’s business environment is today generally more favourable than that in other large countries at similar levels of development and, in some though certainly not all aspects, is in line with the Organisation for Economic Co-operation and Development average. Differences over geopolitics and human rights must be addressed, but it is clear that trade and investment agreements conditioned on accelerated reforms in China would yield substantial dividends. The benefits of such deals would accrue not only to foreign investors in China and exporters to China, but also to consumers and importers in the European Union and, especially, in the US, where punitive tariffs on China remain in effect. Critical aspects in the negotiations would include better access for American and European investors to China’s market for services and improved enforcement of rules and regulations in China. As in many middle-income countries, uneven enforcement of the law (rather than the law itself) remains a critical problem in China.
  • Topic: Development, Bilateral Relations, European Union, Business , Investment
  • Political Geography: China, Europe, Asia, North America, United States of America
  • Author: Marta Dominguez-Jimenez, Alexander Lehmann
  • Publication Date: 05-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: International debt investors increasingly demand assets that are aligned with environmental, social and governance objectives. Sovereign debt is being belatedly swept up in this change. This huge asset class represents a uniquely long-term claim and funds a wide range of public expenditure, both brown and green. Public capital expenditures will be a central part of the roughly €3 trillion investment budget needed to pay for the European Green Deal. European Union countries have so far met investor appetite for climate-aligned assets through sovereign green bonds, the issuance of which has rapidly grown since 2017. The EU itself will also issue green bonds in large volumes. However, because of some inherent flaws in such instruments and as their still-weak frameworks, these bonds are unlikely to meet the environmental criteria demanded by investors, and will complicate established principles in sovereign debt management. Much more comprehensive information is needed on the climate related aspects of the public budgets of EU countries. Greater transparency in this respect would support stability and improve the functioning of capital markets, given that sovereign debt plays a pivotal role in all investor portfolios and also in regulatory and monetary policy. Adoption by sovereign issuers of green budgeting principles, based on a common taxonomy of sustainable activities, would enhance transparency. It could also be driven by investors who, under new EU rules, must disclose the climate-related aspects of all financial instruments offered in the capital market.
  • Topic: Climate Change, Debt, Markets, Sovereignty, European Union, Finance, Sustainability
  • Political Geography: Europe
  • Author: Ben McWilliams, Georg Zachmann
  • Publication Date: 04-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: Hydrogen is seen as a means to decarbonise sectors with greenhouse gas emissions that are hard to reduce, as a medium for energy storage, and as a fallback in case halted fossil-fuel imports lead to energy shortages. Hydrogen is likely to play at least some role in the European Union’s achievement by 2050 of a net-zero greenhouse gas emissions target. However, production of hydrogen in the EU is currently emissions intensive. Hydrogen supply could be decarbonised if produced via electrolysis based on electricity from renewable sources, or produced from natural gas with carbon, capture, and storage. The theoretical production potential of low-carbon hydrogen is virtually unlimited and production volumes will thus depend only on demand and supply cost. Estimates of final hydrogen demand in 2050 range from levels similar to today’s in a low-demand scenario, to ten times today’s level in a high-demand scenario. Hydrogen is used as either a chemical feedstock or an energy source. A base level of 2050 demand can be derived from looking at sectors that already consume hydrogen and others that are likely to adopt hydrogen. The use of hydrogen in many sectors has been demonstrated. Whether use will increase depends on the complex interplay between competing energy supplies, public policy, technological and systems innovation, and consumer preferences. Policymakers must address the need to displace carbon-intensive hydrogen with low-carbon hydrogen, and incentivise the uptake of hydrogen as a means to decarbonise sectors with hard-to-reduce emissions. Certain key principles can be followed without regret: driving down supply costs of low-carbon hydrogen production; accelerating initial deployment with public support to test the economic viability and enable learning; and continued strengthening of climate policies such as the EU emissions trading system to stimulate the growth of hydrogen-based solutions in the areas for which hydrogen is most suitable.
  • Topic: Climate Change, Energy Policy, European Union, Carbon Emissions, Decarbonization, Hydrogen
  • Political Geography: Europe, Global Focus
  • Author: Uri Dadush, André Sapir
  • Publication Date: 04-2021
  • Content Type: Policy Brief
  • Institution: Bruegel
  • Abstract: The European Union is very open to foreign direct investment. By comparison, despite considerable liberalisation in the past two decades, foreign investors in China’s markets still face significant restrictions, especially in services sectors. Given this imbalance, the EU has long sought to improve the situation for its companies operating or wanting to operate in China. After eight years of negotiations, the EU and China concluded in December 2020 a bilateral Comprehensive Agreement on Investment (CAI). The text awaiting ratification aims to give foreign investors greater market access, enforceable via state-to-state dispute settlement. It does not yet, however, cover investor protection (such as against expropriation). Meanwhile, investor protection is covered by bilateral investment treaties between EU countries and China, which remain in force. The CAI has been met in some quarters with scepticism on economic and geopolitical grounds. The main criticism is that it provides little new market access in China, and that this small economic gain for the EU comes at the price of breaking ranks with its main political ally, the United States. Our assessment, which focuses on the economic implications, is different. It is true the CAI provides only modest new market access in China, but this is because China has already made progress in recent years in liberalising its foreign investment regulations unilaterally. The CAI binds this progress under an international treaty, marking an improvement for EU firms insofar as their market access rights can be effectively enforced. Most important, the CAI includes new rules on subsidies, state-owned enterprises, technology transfer and transparency, which will improve effective market access for EU firms operating in China. These bilateral new rules could also pave the way for reform of the multilateral rules under the World Trade Organisation, with the aim of better integrating China into the international trading and investment system – a goal shared by the EU, the United States and other like-minded countries. From an economic viewpoint therefore, the CAI is an important agreement, and one worth having. However, its ratification by the European Parliament is unlikely while China continues to apply sanctions against some members of the European Parliament and other critics of China’s human rights record.
  • Topic: Science and Technology, Bilateral Relations, European Union, Investment, Liberalization
  • Political Geography: China, Europe