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BRUSSELS, March 23 (Reuters) - Germany and the European Union are on a good path to solve a row over the bloc's planned 2035 phaseout of CO2-emitting cars, German Chancellor Olaf Scholz said on his arrival to an EU summit on Thursday.

The official summit agenda covers a broad range of issues from migration to sending ammunition to Ukraine, but last-minute opposition from Germany to one of Europe's biggest climate change policies is looming over the talks.

"If I understand correctly the talks between the Commission and the German government... everything is on a good path," German Chancellor Olaf Scholz said on his arrival to the summit.

Scholz did not specify when he expects a deal to be reached. Some leaders and EU officials suggested it would be a matter of days.

"I think we can get there, not today or tomorrow but over the coming days," Dutch Prime Minister Mark Rutte said.

The car CO2 law is not on the summit's official agenda, nor is it mentioned in leaders' draft conclusions for the meeting - suggesting leaders will not attempt to take any decisions on the matter.

"We can talk about anything, but we have the [EU policymaking] institutions and we cannot be responsible for everything," Luxembourg Prime Minister Xavier Bettel said.

Last-minute opposition from Germany's transport ministry has blocked the EU's law to end sales of new CO2-emitting cars in 2035, despite EU countries and lawmakers already agreeing a deal on it last year.

The dispute has raised concerns among some EU officials that political deals on other major laws could unravel.

"We have chosen a clear path to phase out CO2 emissions from cars, this is not the moment to waiver," said Belgian Prime Minister Alexander De Croo.

The EU law is expected to make it impossible to sell new combustion engine cars in the EU after 2035. Germany's Transport Ministry wants assurances that new combustion engine cars can be sold beyond that date if they run on e-fuels - a request supported by parts of Germany's powerful car industry.

The Ministry and the European Commission, which drafts EU laws, are in talks. A draft EU Commission proposal, seen by Reuters this week, suggested allowing carmakers to register sales in a new type of vehicle category, for cars that can only run on carbon neutral fuels.

On the second day of the summit on Friday, EU heads of state and government will discuss a reform of the EU electricity market.

The European Commission proposed the reforms last week to attempt to avoid severe price spikes such as those experienced last year after Russia cut gas supplies to Europe.

A draft of the EU summit conclusions, seen by Reuters, showed leaders may agree to fast-track the power reforms to agree a deal with the European Parliament by the end of this year.

The draft also urged companies to take part in the EU's planned scheme to jointly buy gas, as it prepares for next winter with scarce Russian supplies.

Greece will also pitch an idea for an EU fund to "supercharge" investments in power grids, to speed the shift to clean energy and improve energy security, according to a document seen by Reuters.

Reporting by Kate Abnett, Philip Blenkinsop, Sabine Siebold, Bart Meijer; editing by Barbara Lewis and Benoit Van Overstraeten

Our Standards: The Thomson Reuters Trust Principles.

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EU, Germany edge towards solution on combustion engine row - Reuters

Germany is negotiating with the European Union to win an exception to the proposed 2035 ban on internal combustion engines to permit cars to run on carbon-neutral synthetic fuels, the countrys Transportation Ministry said on Wednesday.

Berlins abrupt decision in early March to seek a change in the measure on the eve of its final vote has caused a rift among E.U. governments and even automakers, and threatens to undermine legislation that is a cornerstone of the European Unions ambitious plans to make the 27-member bloc carbon-neutral by 2050.

The move is supported by some carmakers, including Porsche, but it has provoked criticism from other manufacturers that have begun spending huge sums to shift their production toward electric vehicles in anticipation of the ban.

Ford Motor and Volvo were among several dozen companies that signed a letter on Monday addressed to European leaders, warning that watering down the terms of a transition to electric vehicles could endanger their businesses as well as the environment.

The lack of a strong regulatory framework could have significant consequences for businesses decarbonization plans, the letter read.

Germanys Transport Ministry said it was in talks with European Commission regulators seeking a provision in the measure that would allow for the sale of cars with engines that were capable of running only on such synthetic fuels, known as e-fuels. Tim Alexandrin, a spokesman for the ministry, described the talks as advanced and complex.

The commission is striving to reach an agreement with Berlin before leaders of the 27 member states arrive for a European Council summit on Thursday.

I am confident that we can find a way to make sure that the interpretation we give to the agreement is also to the satisfaction of the German authorities, Frans Timmermans, the vice president of the European Commission who oversees the blocs push toward climate neutrality, said last week.

E-fuels are made using electricity generated from renewable sources like wind or solar to separate hydrogen from water, and then combining the hydrogen with carbon dioxide captured from air or other sources. When the resulting fuel is burned in an engine, carbon dioxide comes out of the tailpipe, but the idea is that those emissions are offset by the carbon dioxide removed from the atmosphere to produce the fuel.

But e-fuels tend to be expensive and not easily available, and there are doubts about the ability to scale up production by 2035.

If Germany is successful in forcing through a carve-out on e-fuels, it will be the latest time that Berlin has intervened on behalf of its powerful automobile industry to water down Brusselss efforts to curb transportation emissions. More than a quarter of all carbon-dioxide emissions in the European Union are generated by vehicles, according to government statistics.

But with its 800,000 jobs and annual revenue of about 411 billion euros ($443 billion), the automobile industry flexes outsize influence in Germany, Europes largest economy.

It has long held sway over the countrys leaders. Chancellor Angela Merkel intervened in 2013 to prevent European legislation that would tighten emissions rules and, four years later, lobbied again to weaken E.U. emissions testing procedures that were intended to prevent cheating of the kind that Volkswagen committed with its diesel engines.

This time it is Germanys luxury car industry that is pushing back against Brusselss latest attempt to rein in vehicle emissions. Porsche is among the leading proponents of e-fuels and has backed a production facility that opened in Chile last year, even as it continues to develop its popular electric Taycan model.

E-fuels are a feasible alternative to reduce CO2 emissions rather quickly, Oliver Blume, who is chief executive at both Porsche and Volkswagen, told reporters last week. He said the 1.3 billion vehicles with combustion engines already on the global market would still be driven for decades, especially in developing economies, and would benefit from fuel with no net emissions.

If you look at climate protection as a whole, this is not only a German or a European issue alone, it is a worldwide affair, Mr. Blume said.

Several companies that supply Germanys auto industry support including e-fuels in the European rules, including Bosch, Mahle and ZF, as well as major energy companies, including Exxon Mobil.

Italy, home to Ferrari and Fiat, joined the resistance after Germany raised concerns, along with the Czech Republic, Austria and Poland. If enough countries decide not to pass the measure, that could endanger its prospects.

But e-fuels have usually been seen as a future fuel for industrial uses, not cars. Even with plans to increase production, the amount of e-fuels projected to be available in Germany by 2035 would be sufficient to meet only 10 percent of the countrys fuel needs in its air, shipping and chemical industries, according to a study by the Potsdam Institute for Climate Impact Research. Unlike cars, those industries cannot rely on electrification alone to reduce their carbon footprint, the institute said.

Volker Wissing, a member of the Free Democrats party who serves as Germanys minister of transport, argues that despite such warnings, all options need to be kept open in the push to reach climate neutrality.

We are convinced that we need every technological solution to achieve our ambitious climate protection targets and keep society mobile, Mr. Wissing said.

But analysts point out that his party, the smallest of the three partners that make up the government of Chancellor Olaf Scholz, may have been driven by more than just concern for the environment in promoting e-fuels. Since entering the government, the party has seen its popularity nearly halved to just 6 percent, with key state elections planned in Bavaria and Hesse this year. Challenging Brussels could be seen as a way to reverse that slide by attracting approval from Germans who favor combustion engines.

The Free Democrats always have to worry a bit about their parliamentary existence, said Uwe Jun, a political scientist at the University of Trier, referring to the fact that the party fell out of Parliament in 2013 after failing to meet the 5 percent threshold needed for representation.

Senior German government officials insist that they are confident that the Free Democrats will not let the standoff reach a point of actually sinking the European policy, saying that internally, the party has made clear it would accept a compromise.

It remains our goal to reach an agreement, Mr. Alexandrin said.

Monika Pronczuk contributed reporting from Brussels.

See the original post:
Germany Pushes for Exception in Law Banning Combustion Engines - The New York Times

In the global transition towards cleaner and greener mobility, European Union (EU) has been among the frontrunners to mandate new rules for the automobile industry, focusing on reducing carbon emissions. Now, the EU has drafted a proposal suggesting that a new vehicle category can be created for the countries under it, allowing internal combustion engine (ICE) powered cars to run on carbon-neutral e-fuels after 2035. This may give the ICE cars in the continent a new lease of life after the proposed 2035 deadline on fossil fuel vehicle sales in EU countries.

By: HT Auto Desk Updated on: 22 Mar 2023, 16:45 PM

The proposal comes at a time when the EU has been moving forward with plans to ban the sales of new ICE vehicles in the region from 2035, which is claimed to pave the way for an all-electric mobility future. Also, the point must be noted that despite the EU countries and the European Parliament agreeing to the law in 2022 after several months of negotiations, Germanys transport ministry lodged last-minute objections to the law. Germany, which is the largest manufacturer of automobiles in the continent, has demanded that the EU allow the sales of new cars that run solely on e-fuels to be legal after 2035.

Also Read : Earn more, pay more: Petrol price in Pakistan may be linked to income soon

Reuters report that the European Commission has suggested that a new vehicle category could be made in the EU, specifically for cars that run solely on carbon-neutral fuels. The proposal also adds that the vehicles would require to use some fueling inducement system that would determine the type of fuel used and prevent the car from operating if it was fueled with anything other than an e-fuel.

While this proposal shows a way of extending the lifespan of ICE vehicles in the continent, there remain challenges too. This will force the car manufacturers to develop all-new engines, which means the OEMs will have to bear the higher cost of research and development, resulting in higher vehicle prices. Germany, the home of most carmakers, will face most of these challenges if the new rule comes into force.

First Published Date: 22 Mar 2023, 16:45 PM IST

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ICE cars in European Union may get a new lease of life after 2035. Here's how - HT Auto

LONDON, March 22 (Reuters) - The AI Act is expected to be a landmark piece of EU legislation governing the use of artificial intelligence in Europe that has been in the works for over two years.

Lawmakers have proposed classifying different AI tools according to their perceived level of risk, from low to unacceptable. Governments and companies using these tools will have different obligations, depending on the risk level.

The Act is expansive and will govern anyone who provides a product or a service that uses AI. The Act will cover systems that can generate output such as content, predictions, recommendations, or decisions influencing environments.

Apart from uses of AI by companies, it will also look at AI used in public sector and law enforcement. It will work in tandem with other laws such as the General Data Protection Regulation (GDPR).

Those using AI systems which interact with humans, are used for surveillance purposes, or can be used to generate "deepfake" content face strong transparency obligations.

A number of AI tools may be considered high risk, such as those used in critical infrastructure, law enforcement, or education. They are one level below "unacceptable," and therefore are not banned outright.

Instead, those using high-risk AIs will likely be obliged to complete rigorous risk assessments, log their activities, and make data available to authorities to scrutinise. That would be likely to increase compliance costs for companies.

Many of the "high risk" categories where AI use will be strictly controlled would be areas such as law enforcement, migration, infrastructure, product safety and administration of justice.

A GPAIS (General Purpose AI System) is a category proposed by lawmakers to account for AI tools with more than one application, such as generative AI models like ChatGPT.

Lawmakers are currently debating whether all forms of GPAIS will be designated high risk, and what that would mean for technology companies looking to adopt AI into their products. The draft does not clarify what obligations AI system manufacturers would be subject to.

The proposals say those found in breach of the AI Act face fines of up to 30 million euros or 6% of global profits, whichever is higher.

For a company like Microsoft (MSFT.O), which is backing ChatGPT creator OpenAI, it could mean a fine of over $10 billion if found violating the rules.

While the industry expects the Act to be passed this year, there is no concrete deadline. The Act is being discussed by parliamentarians, and after they reach common ground, there will be a trilogue between representatives of the European Parliament, the Council of the European Union and the European Commission.

After the terms are finalised, there would be a grace period of around two years to allow affected parties to comply with the regulations.

Reporting by Martin Coulter and Supantha Mukherjee; Editing by Bernadette Baum

Our Standards: The Thomson Reuters Trust Principles.

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Explainer: What is the European Union AI Act? - Reuters

Chair of the ECB Supervisory Board Andrea Enria and Chairperson of the European Banking Authority (EBA) Jose Manuel Campa in the European Parliament on March 21, 2023.

Thierry Monasse | Getty Images News | Getty Images

U.S. regulators made mistakes in failing to prevent the collapse of Silicon Valley Bank and other financial institutions, according to lawmakers in the European Union who believe this is also a moment for some self-assessment in Europe.

Silvergate Capital, a bank focused on cryptocurrency, was the first to fall, saying March 8 that it would be ceasing operations. Shortly after, Silicon Valley Bank failed after a run on deposits. Signature Bank, which focused on lending to real estate firms, then saw deposit outflows leading regulators to seize the bank to prevent contagion across the sector.

Since then, First Republic Bank has also received support from other banks amid fears of a wider shock to the financial system. And in Switzerland, a non-member of the European Union, authorities had to rescue Credit Suisse by asking UBS to step in with an acquisition.

Meanwhile, regulators and officials across the European Union have been nervous about potential contagion to their own banking sector. After all, it's not been that long since European banks were in the depths of the global financial crisis.

"There is no direct read across of U.S. events to [the] euro area significant banks," Andrea Enria, chair of the European Central Bank's supervisory board, said Tuesday. Like him, an array of officials have made an effort to stress that the European banking system is in much better share compared to 2008.

The U.S. lacks some controls.

Paul Tang

Lawmaker in the European Parliament

This reinforces the view in the EU that the U.S. should learn from some of the regulatory works put in place in the euro area since the financial crisis.

"You need stronger regulation ... in that sense the U.S. lacks some controls," Paul Tang, a lawmaker and a member of the European Parliament's economic committee, told CNBC.

When asked if U.S. regulators made some mistakes, thus failing to prevent the recent banking turmoil, he said: "I definitely think so, you need to have scrutiny. That was the message from 2008."

In the heart of European policymaking, in Brussels, an official, who did not want to be named due to the politically sensitive nature of the topic, told CNBC that several meetings between EU officials in recent days "stressed the failures of regulation [in the U.S.] particularly when compared with the EU."

One of the key differences is that the U.S. has a more relaxed set of capital rules for smaller banks.

"The main difference is the Basel III requirements," Stphanie Yon-Courtin, a member of the European Parliament told CNBC. "These banking rules," she said, "apply to very few banks this is where the problem lays."

Basel III is a set of reforms that strengthens the supervision and risk management of banks and has been developed since 2008.

It applies to most European banks, but American lenders with a balance sheet below $250 billion do not have to follow them.

Despite some of the criticism toward American regulators, the EU recognizes this is not the time to be complacent. "We have to remain vigilant," Yon-Courtin said. "We have to be careful and ensure these rules are still fit for purpose," she added, pushing for a constant monitoring of the rulebook.

One of the main discussions in the EU in recent days has actually been the need to improve the European Banking Union a set of laws introduced in 2014 to make European banks more robust.

The debate has been politically sensitive, but the reality that high interest rates are here to stay has made it even more important.

"We are well aware that the ongoing fast pace normalization of monetary policy conditions is increasing our banks' exposure to interest rate risk," Enria, the chair of the ECB's supervisory board, said Tuesday.

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European lawmakers are quietly miffed at U.S. regulators over SVB's collapse - CNBC