A roundup of this week’s EU policy events

Wopke Hoekstra, European Commissioner for Climate Action and Sultan Ahmed Al Jaber, President of COP28 (Copyright: European Commission - Claudio Centonze, Attribution, via Wikimedia Commons)

As the week draws to a close, Pieter Cleppe, the editor-in-chief of Brussels Report, makes a roundup of what has kept EU policy makers up at night

The big event in EU politics this week is of course the start of the annual climate jamboree, dubbed “COP28”, which is taking place in Dubai this year. Today, already on the first day, Wopke Hoekstra, European Commissioner for Climate Action, announced on the first day that EU taxpayers will need to fork out “at least 225 million euros” for a “loss and damage fund” for climate change, which is meant for the world’s poorest countries. Past experiences with EU spending outside of the bloc are not reassuring. Only in June, the European Court of Auditors criticized that the European Union’s foreign aid budget lacks transparency. Reportedly, 100 million would come directly from Germany however, which in turn raises question marks, as the German federal government has just been banned by its Constitutional Court for re-allocating 60 billion euros of unused debt from the pandemic era to its climate and transformation fund was unconstitutional. Then, at the end of the day, there is plenty of money, as last year, the EU and its member states contributed 28.5 billion euros in climate finance from public sources “to support developing countries to reduce their greenhouse gas emissions and adapt to the impacts of climate change.”

Perhaps let’s not take a look at the track record of developing countries when it comes to spending money. Let’s maybe also ignore how experimental energy policies, inspired by conferences like COP, have caused Germany’s energy prices to skyrocket, leading to news like tyre manufacturer Michelin just deciding to shut down two factories and cut more than 1500 industry jobs in Germany.

A second big issue for EU watchers was the fall-out of the Dutch election, following gigantic victory for rightwing populist Geert Wilders and his Party for Freedom (PVV). Shortly after the election, VVD, the party of outgoing PM Mark Rutte, stated it would not enter any coalition with Wilders but was prepared to support a coalition including his party from the opposition. There are two other parties that could be involved in such a constellation, farmers party BBB and NSC, a party led by breakaway Christian democrat Pieter Omtzigt, which has a centrist profile, but which is open to work with Wilders, provided that he “first states unambiguously which controversial points in [his] election manifesto are no longer topical. The leader of the farmers party on her turn has urged Omtzigt and the VVD “just come and start talking (…) You owe this to the Dutch people.”

In Brussels, these developments are followed closely, given how Wilders supports a Nexit. However, we shouldn’t expect a Dutch referendum on this, as he did not really talk much about this during the election campaign, and as one of the terms of Omtzigt is “to reject speculation about a Nexit”. Then, expect any coalition around Wilders and Omtzigt to have a eurosceptic attitude, as Omtzigt stated during the campaign that he wants the Netherlands to take a firmer position in the EU, explicitly mentioning Hungary and Poland as precedents for that. He also wants a referendum in the Netherlands on EU enlargement.

There were also some interesting foreign policy developments, with Israel summoning the Belgian and Spanish ambassadors following remarks by Spanish Prime Minister Pedro Sánchez and his Belgian counterpart Alexander de Croo, and Israel even recalling its own ambassador out of Spain for consultations, out of dissatisfaction with the country’s stance.

Furthermore, on the “Russia and China front”, Bulgaria denied airspace access to Russian Foreign Minster Lavrov’s plane on the way to an OSCE meeting and EU leaders threatened to put 13 Chinese companies on the EU’s sanctions blacklist if they continue to help Russia circumvent sanctions.

Meanwhile, the European economy is doing anything but great. Germany’s unemployment rate unexpectedly has risen to the highest level in two and a half years, while France’s economy contracted in the third quarter. Inflation statistics have improved, but looking at the experience in the 1970s, this may well turn out to be a temporary phenomenon.

Then there were also some upsides for the continent’s economic wellbeing: the truce between the EU and the U.S. on steel tariffs is likely going to be extended, which is very important for the European steel industry, while newly elected Argentinian President and libertarian hero Javier Milei looks prepared to sign the EU-Mercosur trade deal after all, despite making different noises during his campaign.

Recently, EU trade policy has been in rather muddy waters, especially given the tense conflict between the EU and South East Asian trading partners over the EU’s new deforestation rules. On Monday, it emerged that hundreds of thousands of tonnes of coffee and cocoa stored in EU warehouses risk being destroyed as an unforeseen consequence of this regulation, which came into force in June this year.

In response, Malaysia and Indonesia, decided to freeze trade talks with the European Union over this. In contrast, their trade relations with the UK are excellent, as the UK’s decision to recognise the local “Malaysian Sustainable Palm Oil (MSPO)” certification programme helped it to get access to the CPTPP trade arrangement, the biggest UK trade win so far. Developments like Global Forest Watch declaring that Malaysia had made great progress in reducing deforestation have so far not managed to convince EU policy makers to change their stance.

At least the Dutch caretaker government has pledged to defend Malaysia’s corner. This is no minor issue. The ITC, a joint agency of the UN and the World Trade Organisation, has warned that the EU’s stance may well have a “catastrophic” effect on global trade, as smaller producers in particular risk being “cut off”. Separately, the Financial Times notes that not only the deforestation issue, but also the EU’s new protectionist carbon tariff, the carbon border adjustment mechanism (CBAM), “are causing serious alarm among low-income countries.” Euractiv has dubbed the EU’s approach here “clumsy carbon diplomacy”. Perhaps COP28 could be useful in enabling diplomats from poorer countries to bring this message to their EU counterparts face to face.