A fair, fast and competitive transition begins with what already works and then rapidly scales it up.  Across the EU commercial road transport sector, the diversity of operations is met with a diversity of solutions. Urban taxis are switching to electric en masse. Many regional coaches run on advanced biofuels, with electrification emerging in smaller applications such as school services, as European e-coach technologies are still maturing and only now beginning to enter the market. Trucks electrify rapidly where operationally and financially possible, while others, including long-haul and other hard-to-electrify segments, operate at scale on HVO (hydrotreated vegetable oil) or biomethane, cutting emissions immediately and reliably. These are real choices made every day by operators facing different missions, distances, terrains and energy realities, showing that decarbonization is not a single pathway but a spectrum of viable ones.  Building on this diversity, many operators are already modernizing their fleets and cutting emissions through electrification. When they can control charging, routing and energy supply, electric vehicles often deliver a positive total cost of ownership (TCO), strong reliability and operational benefits. These early adopters prove that electrification works where the enabling conditions are in place, and that its potential can expand dramatically with the right support. > Decarbonization is not a single pathway but a spectrum of viable ones chosen > daily by operators facing real-world conditions. But scaling electrification faces structural bottlenecks. Grid capacity is constrained across the EU, and upgrades routinely take years. As most heavy-duty vehicle charging will occur at depots, operators cannot simply move around to look for grid opportunities. They are bound to the location of their facilities.  The recently published grid package tries, albeit timidly, to address some of these challenges, but it neither resolves the core capacity deficiencies nor fixes the fundamental conditions that determine a positive TCO: the predictability of electricity prices, the stability of delivered power, and the resulting charging time. A truck expected to recharge in one hour at a high-power station may wait far longer if available grid power drops. Without reliable timelines, predictable costs and sufficient depot capacity, most transport operators cannot make long-term investment decisions. And the grid is only part of the enabling conditions needed: depot charging infrastructure itself requires significant additional investment, on top of vehicles that already cost several hundreds of thousands of euros more than their diesel equivalents.  This is why the EU needs two things at once: strong enablers for electrification and hydrogen; and predictability on what the EU actually recognizes as clean. Operators using renewable fuels, from biomethane to advanced biofuels and HVO, delivering up to 90 percent CO2 reduction, are cutting emissions today. Yet current CO2 frameworks, for both light-duty vehicles and heavy-duty trucks, fail to recognize fleets running on these fuels as part of the EU’s decarbonization solution for road transport, even when they deliver immediate, measurable climate benefits. This lack of clarity limits investment and slows additional emission reductions that could happen today. > Policies that punish before enabling will not accelerate the transition; a > successful shift must empower operators, not constrain them. The revision of both CO2 standards, for cars and vans, and for heavy-duty vehicles, will therefore be pivotal. They must support electrification and hydrogen where they fit the mission, while also recognizing the contribution of renewable and low-carbon fuels across the fleet. Regulations that exclude proven clean options will not accelerate the transition. They will restrict it.  With this in mind, the question is: why would the EU consider imposing purchasing mandates on operators or excessively high emission-reduction targets on member states that would, in practice, force quotas on buyers? Such measures would punish before enabling, removing choice from those who know their operations best. A successful transition must empower operators, not constrain them.  The EU’s transport sector is committed and already delivering. With the right enablers, a technology-neutral framework, and clarity on what counts as clean, the EU can turn today’s early successes into a scalable, fair and competitive decarbonization pathway.  We now look with great interest to the upcoming Automotive Package, hoping to see pragmatic solutions to these pressing questions, solutions that EU transport operators, as the buyers and daily users of all these technologies, are keenly expecting. -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is IRU – International Road Transport Union  * The ultimate controlling entity is IRU – International Road Transport Union  More information here.

KYIV — Ukrainian President Volodymyr Zelenskyy wants to expand his military offensive against major oil facilities deep in the Russian interior. “We hit a certain number of their refineries; they’ve got a problem. When they started to restore and saw the queues of cars, they redistributed the volumes to other refineries,” Zelenskyy said during a meeting with a small group of journalists, including POLITICO, in Kyiv. “Therefore, our task is absolutely clear — to continue our work at other plants that have started to increase the volume, especially diesel. And we just have to work on it every day,” Zelenskyy added. Ukraine has reportedly struck 21 out of Russia’s 38 large oil refineries across the country since January, according to the BBC. Ukraine aims to cripple the Russian oil industry and cut the key source of revenue to Moscow’s war machine. And Zelenskyy believes that long-range oil strikes, plus U.S. sanctions and a mega loan to Kyiv from the EU financed by frozen Russian assets, could push Kremlin chief Vladimir Putin to the negotiating table. Zelenskyy said that, even though Kyiv wants allies to continue providing long-range missiles, expanding domestic long-range capabilities is a key priority. He added that Ukraine conducts 90 percent of its deep strikes into Russia with its own long-range drones and cruise missiles, but sometimes Kyiv uses the U.K.’s Storm Shadow and French SCALP missiles to hit targets. “Long-range capability is a component of independence and will be the greatest component for ensuring peace,” Zelenskyy added in an evening address to the nation Monday. “All deep-strike goals must be fully locked in by year’s end, including expansion of our long-range footprint.” Earlier, he met with Ukrainian producers of long-range weapons and ordered the government to lock in 57 long-term contracts with makers of key long-range drones and missiles by the end of the year. Ukraine is also building a stockpile of its latest home-made cruise missiles, the Flamingo, “to launch a […] massive strike on Russia by the end of the year,” Zelenskyy warned. “We must work every day to weaken the Russians. Their money for the war comes from oil refining,” the Ukrainian president added. Zelenskyy said strikes on Russian energy facilities are just part of a pressure campaign he hopes can force Putin to end his full-scale invasion. A key part of that package of measures, Zelenskyy said, is the EU unfreezing €140 billion in Russian assets held in the bloc to use as a massive reparation loan to help Ukraine — and he’s keen for the EU to green-light that in December at a leaders’ summit. “For Putin, the scariest part in the whole Russian-assets-for-Ukraine story is that Europe would give a signal that there is no point for him to continue his war of attrition against Ukraine, as there will be no financial attrition,” Zelenskyy said. Zelenskyy said he was very grateful for American sanctions on Russia’s Lukoil and Rosneft oil companies and now hopes that U.S. President Donald Trump, during his meeting with Chinese leader Xi Jinping this week, will be able to persuade Beijing to buy less oil from Moscow. “This is all the right direction to put pressure on Russia to be ready to end the war — sanctions, weapons, use of assets,” Zelenskyy said.

Repairs are underway at Ukraine’s Zaporizhzhia nuclear power plant after “local ceasefire zones” were established in the area, the United Nations nuclear watchdog said on Saturday. “Restoration of off-site power is crucial for nuclear safety and security. Both sides engaged constructively with the [International Atomic Energy Agency] to enable complex repair plan to proceed,” the IAEA wrote in a post on X. The Russian-occupied facility in southeastern Ukraine has been cut off from the national grid for four weeks — its longest blackout since the Russia’s invasion in February 2022. The plant has been using on diesel generators since its last power line went down last month. Without reliable power, Europe’s largest nuclear plant risks losing the cooling needed to keep its reactors stable. “The situation is critical,” warned Ukrainian President Volodymyr Zelenskyy in late September. “The generators and the plant were not designed for this, and have never operated in this mode for so long. And we already have information that one generator has failed,” he said. Ukraine’s Energy Ministry reportedly confirmed that specialists were proceeding on the latest round of repair works of the power lines. “The only reason for the unprecedented risks and threat of a radiation incident in Europe is Russian military aggression, the occupation of the Ukrainian Zaporizhzhya NPP and the systematic shelling of Ukraine’s energy infrastructure,” it said in a Telegram post.

The question isn’t whether globalization will continue, but who will lead it and on what terms, says BMW’s Frank Niederländer. With geopolitical tensions and uncertainty in the world market on the rise, the EU has an opportunity to shape the global trade agenda — if it gets out of its own way. “Europe had the ambition to lead with the Green Deal, setting the pace for the global economy,” says Niederländer, BMW Group Vice President, Government Affairs Europe. “But while we focused on regulation, others moved ahead prioritizing speed, investment and outcomes.” > We need to envision growth as an imperative again. > > Frank Niederländer, BMW Group vice president, government affairs Europe Europe’s auto industry has a sterling reputation globally for manufacturing high-quality vehicles, and the EU has a goal of zero emissions for all cars by 2035. But China’s drive for innovation has helped it lead the world market for electric cars. Only one of the world’s top 15 battery electric vehicles is made in the EU. “The share of EVs sold still depends heavily on national regulatory conditions. This fragmentation in the single market remains one of the greatest challenges to the uptake of electric vehicles. Political alignment, investment scale and the ability to react with speed is essential,” says Niederländer. POLITICO Studio sat down with Niederländer to discuss what shifts need to happen to create a climate-neutral, competitive Europe. POLITICO Studio: What is BMW’s outlook on international trade in this era of geopolitical tension? Frank Niederländer: The global trading system is shifting — and it has real consequences. It shapes investment flows, supply chains and the rules of competition in real time. Other regions are acting with intent ― investing heavily to secure their industrial bases through billions in subsidies, raw material lockdowns and strategic alliances that give them an edge. Access to energy, technology and key inputs is now, very openly, used as leverage. The risk for Europe isn’t deglobalization, it’s marginalization. It’s falling behind while others move with more speed and focus. Europe must remain open with a trade policy that reinforces our competitiveness, secures our supply chains and reflects our values, while recognizing and managing strategic dependencies. PS: Amid the United States’ increasingly isolationist trade policies, is there a new opportunity for Europe? FN: There could be, if the EU stops playing defense and starts thinking strategically about where it wants to lead. Europe has a chance to position itself as a stable, credible anchor for open and fair trade. For that, we need cohesion within the EU, and alignment of environmental, economic and trade policy. More free trade agreements with core partners (such as Mercosur) are essential today after a long period of insufficient EU engagement. Europe has what it takes to lead: a strong Single Market, technological leadership and a solid rule-of-law tradition. What’s missing is the will to shape the global trading system, not just manage its consequences. We should focus on areas where the need for collaboration is highest, such as climate-neutral industry, resilient supply chains and high-value innovation. The EU must be capable of swiftly recalibrating its priorities to keep pace with the evolving geopolitical environment, or it may find itself sidelined. We need to envisage growth as an imperative again. PS: What emerging technologies could define Europe’s competitive edge? How is BMW helping to accelerate them? FN: Europe’s edge will be defined by the convergence of climate ambition and industrial competitiveness. The winning technologies will be those that deliver both. At BMW, this is already shaping how we build, invest and compete globally. We have long embedded circularity into the core of our strategy ― in the design phase, material sourcing and end-of-life recycling. We are also investing heavily in battery cell innovation and scaling European production capacity while continuing to advance a broad range of powertrain technologies ― from electric drivetrains to highly efficient combustion engines running on renewable fuels. In fact, all diesel BMW vehicles produced in Germany are now delivered with HVO100, a renewable fuel that reduces life cycle CO2 emissions by up to 90 percent. Europe has the talent and industrial base to lead. The challenge now is to translate that potential into scale — with policy that recognizes and accelerates technological leadership. We need agile policy frameworks, public-private partnerships and an ecosystem that fosters innovation, rather than policies that dictate technologies. > Europe has the talent and industrial base to lead. The challenge now is to > translate that potential into scale — with policy that recognizes and > accelerates technological leadership. PS: How can Europe turn decarbonization into a long-term competitive advantage? What role does BMW play in that transformation? FN: Decarbonization can give Europe an economic edge if we scale up cost-effective, low-carbon technologies. While Europe led with ever tighter regulation, other regions ― notably the U.S. and China ― have advanced by mobilizing massive investments, securing critical resources and rapidly scaling technologies. Still, Europe has what it takes to lead this transition through choice and innovation, not restrictions.  Take the supply chain. The largest levers for reducing CO2 emissions lie upstream from manufacturers. We prioritize renewable electricity, secondary materials and low-carbon production processes, and we actively invest in and source from suppliers that meet those standards. That creates real momentum on the demand side to accelerate the transition. This approach plays to Europe’s industrial strengths: advanced engineering capabilities, integrated supply chains and the ability to deliver premium solutions across multiple technologies. Let companies compete to deliver the best climate solutions — that’s how we’ll maintain global leadership. PS: How does life cycle assessment (LCA) affect BMW’s strategies? FN: At BMW, our strategic focus is clear ― achieving business success while reducing our climate footprint. To do that, we must look at the full life cycle of our products ― from raw material extraction to manufacturing, use and end-of-life recycling. This is essential if we want climate policy to reflect real impact. Tailpipe emissions cannot be the only measure of a vehicle’s environmental impact. We need to assess CO2 emissions across the entire value chain. This means designing with carbon footprint in mind from the start, and we’re already applying this approach with the Neue Klasse, a new, fully electric BMW model generation, where we are embedding circularity and carbon reduction every stage of development. The EU’s move toward LCA is welcome — but it needs consistency, transparency and practical application across sectors. Done right, LCA will reward innovation where it matters most: in cutting total emissions. PS: How is BMW future-proofing its global supply chain? FN: Europe’s future competitiveness will hinge on whether we treat supply chains as a strategic asset, not a logistical challenge. That’s especially true in areas such as the battery value chain, where industrial success depends on both resilience and global cooperation. This will require massive investments — just look at the figures in the Draghi report. This isn’t about reducing complexity. It’s about managing it. Engagement with partners such as China must be realistic and rules-based, because decoupling is neither feasible nor desirable. Europe cannot operate as an island. At BMW, our global production footprint is built upon a strong European foundation. We localize to serve markets more efficiently and to strengthen resilience, and our international presence amplifies Europe’s role as a hub for innovation, engineering excellence and high-value manufacturing. > Climate neutrality must be engineered — deliberately, collaboratively, and at > scale. PS: What can the EU do to ensure that companies like BMW remain globally competitive while leading the green transition? FN: Europe has the chance to define climate neutrality in a way that keeps Europe competitive and keeps jobs here. Stronger cooperation between governments and industry is key. The Strategic Dialogue launched by EU Commission President Ursula von der Leyen was an important step to this and must continue. The future will be shaped by many choices — smart regulation, strong industrial alliances and a shared commitment to progress that is measurable, not ideological. PS: What future does BMW imagine for a climate-neutral world? FN: A climate-neutral Europe is not just a moral responsibility — it’s a competitive imperative. It means rethinking how we power industries, design products and create value chains. The future will be built not on a single breakthrough but by thousands of decisions across technology, regulation and investment. Climate neutrality must be engineered — deliberately, collaboratively and at scale.   At BMW Group, we are engineering that future with purpose. Our 2030 climate targets are fully aligned with the Paris Agreement, which means reducing our CO2 emissions by 40 million tons by 2030 as compared to 2019. Europe has the potential to lead this transformation. But leadership requires the courage to move beyond outdated regulations, respond decisively to shifting geopolitical realities and streamline the path forward. This is the moment to lead with conviction.

BRUSSELS — The European Union will soon have new powers to gradually restrict and ultimately ban the flow of Russian gas across the continent within the next three years as part of an unprecedented push against reliance on Moscow. Speaking in Strasbourg on Tuesday, Energy Commissioner Dan Jørgensen will unveil detailed proposals designed to eliminate imports of fossil fuels from Russia by 2027, following sign-off from Commission President Ursula von der Leyen’s top team. A draft document, seen by POLITICO ahead of its publication, pledges to remove “the Union’s exposure to the significant risks for trade and security, resulting from gas trade with the Russian Federation by laying down a stepwise prohibition of imports of natural gas,” and to “introduce rules to effectively implement and monitor that prohibition.” From Jan. 1, 2026, the import of natural gas via pipelines or as seaborne liquefied natural gas will be prohibited, except in specific circumstances, which would include short-term contracts struck prior to June 17, 2026. Exceptions are also built into the text for landlocked countries that have struck long-term agreements with Moscow. The terms of the text also leave open the possibility that some European firms could continue importing Russian gas under long-term contracts until Jan. 1, 2028. In an unprecedented move, gas that arrives in the EU via Russia, such as through interconnection points through Serbia, will be considered Russian gas unless it has clear documentation demonstrating it has originated elsewhere. Countries will also have to publish new “diversification plans” showing how they will end reliance on both Russian oil and gas. The legal mechanisms were promised as part of the REPowerEU Roadmap on ending reliance on Russian energy last month, which set ambitions for a blanket ban on fossil fuel purchases that fund the Kremlin’s war in Ukraine. Companies will have new requirements to report on the origin of their energy imports, while its sights are also set on nuclear fuel. At the same time, Brussels has shifted into gear on a range of new sanctions, proposing a moratorium on buying petrol, diesel and jet fuel refined from Russian crude and backing lowering a G7 price cap on its oil from $60 a barrel to just $45. However, Hungary and Slovakia have continued to buy Russian oil and gas since the start of the full-scale war, and even used what were supposed to be temporary derogations to cash in on cheap supplies. The two Kremlin-friendly governments have voiced fury at the plans to cut them off, threatening to veto key measures if Brussels pushes ahead regardless. Under the plans presented by Jørgensen on Tuesday, they would be given additional time to exit Russian energy given their comparative lack of progress so far. While these measures are trade and taxation changes, which can be passed by qualified majority vote, both the introduction of new sanctions and the rollover of existing ones will require unanimous support of all 27 countries.

A German regional court on Monday convicted four former Volkswagen executives of fraud in connection with the long-running Dieselgate emissions scandal. The court sentenced two of the former executives to prison for several years, while the remaining two received suspended sentences. The ruling concludes a major trial that spanned nearly four years. The scandal known as Dieselgate first came to light in September 2015, when the U.S. Environmental Protection Agency discovered that many diesel vehicles produced by German carmaker Volkswagen were equipped with illegal so-called defeat devices. These devices detected when a car was undergoing emissions testing and altered performance to meet environmental standards — while in real-world driving conditions, the cars emitted pollutants far above legal limits. In 2017, Volkswagen admitted to manipulating emissions data in the United States, sparking global backlash and triggering one of the biggest corporate scandals in automotive history. The fallout plunged the Wolfsburg-based carmaker into a deep crisis. In 2019, German prosecutors charged then-CEO Herbert Diess, Chair Hans Dieter Pötsch and former CEO Martin Winterkorn — who resigned shortly after the scandal broke in 2015 — with market manipulation related to the emissions deception. In 2020, a German court ended legal proceedings against Deiss and Pötsch as VW coughed up a €9 million fine over the scandal. Winterkorn was originally set to be part of this trial, but was removed for health reasons before it kicked off in September 2021. In his capacity as a witness and defendant, Winterkorn has continued to deny responsibility for the scandal. Since the scandal erupted, Volkswagen has faced a barrage of lawsuits and legal proceedings. In 2020, the company said that the crisis had cost it more than €30 billion in fines and settlements.

BERLIN — U.S. President Donald Trump’s on-again-off-again moves to impose huge tariffs — looming over €161 billion of annual German exports to America — could hardly have come at a worse time for Europe’s biggest economy as it teeters on the brink of a third straight year of recession. Little wonder, then, that Wednesday’s newly minted coalition agreement for the incoming administration of Chancellor-designate Friedrich Merz focused heavily on a wholesale economic reboot. Merz has already sent a clear message to the continent that Berlin is out to shake off its fiscal conservatism, relax its notorious debt brake and inject hundreds of billions of euros into its infrastructure and defense as Trump wavers on U.S. commitments to European security. The coalition agreement between Merz’s center-right Christian Democrats and the center-left Social Democrats reads like an economic war plan: tax cuts, energy price reductions and a blitz of public-private investment funds. At its heart is the promise — or gamble — that Germany can regain its competitive edge as global headwinds intensify. “First of all, we will strengthen the price competitiveness of the German economy,” Merz declared in Berlin. After a dismal year that saw Germany’s economic output shrink by 0.2 percent, even modest growth forecasts for 2025 look fragile, particularly given Trump’s global tariff barrage. Merz is framing the coalition agreement as a pro-growth manifesto. A “Germany Fund” will be seeded with €10 billion of public money, while an ambitious pitch to private investors aims to increase this to €100 billion to support start-ups and scale up enterprises. The government is also promising an “investment booster” — a corporate tax write-down to encourage investment. “The future coalition will reform and invest to make Germany … economically stronger. And Europe can also rely on Germany,” Merz said. The parties promise to lower electricity taxes, reduce grid fees, abolish a levy on gas prices and introduce an industrial electricity rate — all in the name of reviving industrial production. Voluntary overtime is to be made tax-free. The coalition agreement also declares the steel industry to be of “key strategic importance.” | Sean Gallup/Getty Images The coalition agreement also declares the steel industry to be of “key strategic importance” and endorses carbon capture and storage technology, while promising tax breaks for electric vehicles. While the headlines herald reform, many of the key measures come with delays or caveats, however. A gradual cut in corporation taxes, for example, from 15 percent to 10 percent, won’t start before 2028.  ALL ABOUT THE FUNDING The pact between the parties carries the existential warning that “all measures in the coalition agreement are subject to financing.” And there’s the rub: That funding is far from guaranteed. The government plans to cut public funding by €1 billion this year and reduce administrative costs by 10 percent by 2029 — with an 8 percent cut in the number of civil servants, excluding security forces. A sweeping review of subsidies and support programs is also underway. A politically sensitive U-turn is hidden in the fine print. The coalition will reinstate the agricultural diesel rebate, whose abolition sparked mass protests by farmers in the winter from 2023 to 2024. Electricity taxes will fall by five cents per kilowatt hour — a long-awaited concession in a country with some of the highest energy prices in the EU. The biggest ideological victory for the conservatives may be the announced repeal of the National Supply Chain Act, a signature Social Democrat policy enacted just two years ago to press companies to vet the sourcing of their goods more rigorously. CAUTIOUS OPTIMISM The response from economists has been cautiously optimistic, but tempered with a dose of skepticism. Michael Hüther, director of the Cologne-based Institute for Economic Research, called the electricity price reforms a “strong signal” to domestic industry in the face of global volatility. The slow-burning corporate tax cut, he said, “also gives hope.” But he criticized a perceived lack of clarity. “Large parts of the coalition agreement read vaguely, and the lines of conflict between SPD and CDU/CSU are very clear, for example on income tax. More courage would have been better here.” Marcel Fratzscher, president of the German Institute for Economic Research, was more blunt. “There is a lack of ambition,” he warned. While praising certain aspects of the coalition deal, including infrastructure investment and reform of the defense debt brake, he lamented the lack of a broader tax overhaul and the underwhelming emphasis on Europe’s strategic role. More damningly, Fratzscher cast doubt on whether much of the agreement would actually be realized. “There is a lack of clear implementation strategies,” he said. The bottom line is that Merz is staking his leadership on the hope that tax cuts and energy reform will turn the economic tide. But with a fragile budget, internal coalition rifts and a skeptical business community, execution will be everything.

United States President Donald Trump vowed to impose hefty financial penalties on Russian crude oil imports if Moscow does not sign up to a ceasefire in Ukraine within the next month. Speaking in an interview with NBC, Trump said he was “very angry” and “pissed off” after Russian leader Vladimir Putin called for the ousting of Ukrainian President Volodymyr Zelenskyy by a United Nations-backed transitional government. “If Russia and I are unable to make a deal on stopping the bloodshed in Ukraine, and if I think it was Russia’s fault — which it might not be — but if I think it was Russia’s fault, I am going to put secondary tariffs on oil, on all oil coming out of Russia,” the American president said. “That would be that if you buy oil from Russia, you can’t do business in the United States. There will be a 25 percent tariff on all oil, a 25- to 50-point tariff on all oil,” Trump said. The European Union has imposed an embargo on seaborne shipments of Russian oil in the wake of Putin’s full-scale invasion of Ukraine, but a number of EU member countries, including Hungary and Slovakia, continue to buy it via pipeline. Meanwhile, other NATO allies like Turkey, as well as countries like China and India, have stepped up their purchases of crude from Russia. Petrol, diesel and jet fuel refined from Russian oil in third countries is then sold around the world, including in the U.S. and Europe. The intervention from Trump flies in the face of recent talk of a burgeoning thaw in Russia-U.S. relations, after the White House indicated it was prepared to help ease sanctions on Moscow in exchange for a ceasefire in the Black Sea. European countries have reacted furiously to the idea that they could return to buying Russian fossil fuels for anything short of a lasting and comprehensive peace — and justice for the Ukrainians. Earlier this week, U.S. Secretary of State Marco Rubio played down the prospects of a high-level dialogue to end the war, saying that “there’s a lot of work to be done” and  “I think you have to make more progress on a technical level.”

BRUSSELS ― Conservative leader Friedrich Merz won the German election Sunday and is on track to take the reins of the EU’s largest economy. It’s not yet clear exactly what the new German government will look like — or how far Merz will be able to reshape German politics as he sees fit. It’s likely to be weeks before coalition talks between Merz’s Christian Democratic alliance (CDU/CSU) and other parties reach an agreement and Merz becomes chancellor. Still, one thing looks certain: Merz will take Germany in a different direction from that of current Chancellor Olaf Scholz. It may not even look like the Germany that Angela Merkel, also of the CDU, led for 16 years, until 2021. -------------------------------------------------------------------------------- Early projection 2021 2025 25.7% SPD 24.1% CDU/CSU 14.7% Greens 11.4% FDP 10.4% AfD 8.7% Others 4.9% Left Social Democratic Party of Germany Christian Democratic Union of Germany Alliance 90/The Greens Free Democratic Party Alternative for Germany Others The Left Turnout: 76.35% 28.6% CDU/CSU 20.4% AfD 16.3% SPD 12.3% Greens 8.5% Left 4.9% BSW 4.7% FDP 4.3% Others Christian Democratic Union of Germany/Christian Social Union Alternative for Germany Social Democratic Party of Germany Alliance 90/The Greens The Left Alliance Sahra Wagenknecht Free Democratic Party Others Source: ARD -------------------------------------------------------------------------------- Last month, Merz (unsuccessfully) pushed the German parliament for new migration measures with the support of the far-right Alternative for Germany party. It marked a clear departure from Merkel’s “Wir schaffen das” pledge to take in refugees. And there’s more. From a potential U-turn in Germany’s long-standing policy on nuclear energy and a more hawkish line on China, to plans to reboot the German-French axis to bolster EU trade, Merz could shake up the political landscape of Germany and, in one fell swoop, that of the European Union as a whole. Here’s what a Merz-led Germany means for the EU. -------------------------------------------------------------------------------- Defense Energy Climate Sustainability Mobility Trade Agriculture Central Banking Financial Services Competition Tech Cyber Health -------------------------------------------------------------------------------- Advertisement DEFENSE Two days before the election, Merz issued a stark warning that Europe must be prepared to defend itself without the U.S. “We must prepare for the possibility that Donald Trump will no longer uphold NATO’s mutual defense commitment unconditionally,” Merz said in an interview with a German broadcaster, signaling that Germany may seek nuclear protection from European allies. “We need to have discussions with both the British and the French — the two European nuclear powers — about whether nuclear sharing, or at least nuclear security from the U.K. and France, could also apply to us,” he said. Elsewhere, Merz has promised big and broad policies to scale up Germany’s defense industry, and will be expected to follow through quickly on an earlier pledge to scrap his predecessor’s block on the dispatch of long-range Taurus cruise missiles to Ukraine for strikes on Russian targets. A major theme of his early weeks in the chancellery will be setting out how Berlin plans to raise the cash to expand on the €100 billion fund agreed under the Scholz government to finance an upgrade of the Bundeswehr’s gear and digs. That cash pot has been allocated and will be spent up by 2027 on massive procurement programs, raising questions over how Berlin plans to meet its obligations to NATO — which Merz has promised to do in the future — from the conventional national budget. “The 2 percent target may be pushed up again and then we will have to prepare ourselves for that,” Merz told POLITICO’s Berlin Playbook podcast of plans to further raise the NATO target given Trump has called for a 5 percent target. Select another policy area -------------------------------------------------------------------------------- ENERGY Over the past few years, German energy policy has focused on turbocharging investment in renewable energy, shutting down nuclear reactors and scrambling to secure gas supplies from abroad to replace Russian imports.  Merz’s CDU has similarly vowed to “consistently use renewable energies, all of them.” But his political family, the center-right European People’s Party, is also pushing back against EU green energy targets. Meanwhile, Merz has taken a warmer tone toward nuclear energy than Scholz, which is challenging a long-standing German taboo around atomic power. While the country is unlikely to revive its shuttered reactors, a more lenient nuclear stance from Berlin could help pro-atomic countries persuade Brussels to treat atomic power more like renewables.  Merz has also said he wants to repeal Germany’s hard-fought Building Energy Law, which aims to accelerate a clean heating rollout — offering a potential signal to green skeptics in Europe.  Select another policy area -------------------------------------------------------------------------------- Advertisement CLIMATE A Merz-led government will place less emphasis on climate change than Scholz’s coalition. Merz expressed concern on the campaign trail about the impact of climate policy on business, vowed to put economic growth above all other concerns and led a call to roll back several EU green regulations. But green advocates express confidence that in government Merz’s rhetorical hammer will turn feather duster. Industry, broadly, wants less bureaucracy, but it also wants consistent policy. Industrial stimulus can be used to help companies become greener and more efficient. “That they will not do it in the name of climate policy. Fine. If it’s economic policy for them. Fine,” said Linda Kalcher, executive director of the Strategic Perspectives think tank. Select another policy area -------------------------------------------------------------------------------- SUSTAINABILITY Merz, like Scholz, wants to delay key corporate sustainability reporting rules to boost Germany’s ailing industry. That means it’s pretty much assured that Germany under Merz would back a strong omnibus simplification bill for green rules, a proposal the European Commission is expected to release on Feb. 26. A Merz victory also means the center-right European People’s Party, which dominates the European Parliament and is Merz’s political family, once again has a powerful ally in the EU’s biggest economy. Already, the EPP has pushed hard to water down the EU anti-deforestation rule with the support of groups further to the right (mostly without success thus far). Select another policy area -------------------------------------------------------------------------------- MOBILITY Merz is inheriting an economy in recession that is being further dragged down by a crisis engulfing its automotive sector. He recognizes the problems: high energy and labor costs, and stiff competition in the electric vehicle transition. But he’s been light on the details of how he intends to help automakers. In campaign speeches, he promised to cut red tape and reduce high costs but stopped short of putting support behind reforming Germany’s debt brake, which will keep Merz’s hands tied when it comes to funding such initiatives. Germany’s carmakers are highly dependent on the Chinese market, which led Scholz to acquiesce to Beijing’s wishes, such as lobbying against the made-in-China EV duties. Merz will take a harder line with China and has made clear to automakers that they should not come crawling to him if their Asian investments blow up. Select another policy area -------------------------------------------------------------------------------- TRADE Taking a stronger line on Russia and China and rekindling old friendships with fellow EU leaders: Merz has his work cut out for him if he wants to link the German export economy to global growth hot spots like the Mercosur countries, Mexico or Southeast Asia. Merz recognizes that a functional Franco-German axis can create more trade deals, more certainty for companies and — eventually — a stronger Europe. “We have to overcome our dispute on Mercosur,” Merz told the World Economic Forum in Davos last month, saying he was in regular close contact with French President Emmanuel Macron. The Christian Democrat has also signaled a harder approach to China. Or, at least, he’s admitted the German economy is too dependent on Beijing’s woes and wishes. But just how hawkish Merz’s approach to trade will end up being is likely to be determined by who he ends up with as a coalition partner. Select another policy area -------------------------------------------------------------------------------- Advertisement AGRICULTURE A victory for Merz’s CDU means Berlin will align on agricultural policy with both the largest political bloc in the European Parliament — the European People’s Party led by Bavarian Manfred Weber — and EU Agriculture Commissioner Christophe Hansen. Ahead of negotiations over the future of the EU’s Common Agricultural Policy, Hansen has launched an overhaul of farm policy that would effectively roll back the green agenda of the last term and instead emphasize making farming a more attractive and economically viable occupation. In its campaign platform, Merz’s CDU said it wants a CAP “that serves farmers.” Scholz’s center-left government pushed initiatives to support organic farming and reduce food waste. But it clashed with farmers a year ago over its decision to scrap tax breaks on agricultural diesel. The CDU said it will reinstate the diesel tax break and take broader action to strengthen planning security for farmers. “With the CDU, no farmer will have to protest with his tractor in front of the Brandenburg Gate anymore,” the party said. Select another policy area -------------------------------------------------------------------------------- CENTRAL BANKING Merz’s chancellorship will mark the return of conservative opposition to meddling with Germany’s notorious debt brake, which limits government deficit spending to 0.35 percent a year and is seen by many as the cause of the shoddy state of the country’s infrastructure.  Scholz’s efforts to tamper with the brake caused the collapse of his government, and Merz’s CDU faction is fiercely opposed to any reform — up to a point. Surprisingly enough, Merz himself, during a TV debate earlier this month, intimated openness to some fine-tuning, but not before other solutions are tried. Timid, yes, but revolutionary from a Christian Democrat.  Otherwise, financial markets are broadly skeptical that Merz can do much to stall Germany’s well-documented economic decline, with gross domestic product expected to contract 0.5 percent in 2025. During the race, the choice between the two parties’ economic policies was ultimately “superficial,” ING Global Head of Macro Carsten Brzeski lamented in a note earlier this month, noting that Merz’s plans for tax and spending cuts reflected an almost spiritual faith in free markets — the very same markets that have dealt such a humiliating blow to Germany’s economic prestige.  Merz will also have critical sway over the outcome of a major transnational banking battle that could put EU ideals to the test. When Milanese lender UniCredit made its surprise bid on Germany’s Commerzbank last year, it looked like exactly the kind of cross-border banking consolidation that Mario Draghi was advocating in his landmark report — until Scholz’s government reacted with horror and dreamed up wild schemes to block it. UniCredit CEO Andrea Orcel has since said he will wait on Merz’s position before making another move, but it’s hard to imagine the new leader will be any more keen to give away one of the country’s most prized lenders.  Select another policy area -------------------------------------------------------------------------------- FINANCIAL SERVICES Merz holds the keys to significantly boosting Europe’s defense capabilities in the years to come. As Trump pressures Europe to pony up military spending, many in Brussels are anxiously waiting for Germany to give its blessing for the European Commission to borrow money on behalf of member countries. Highly indebted countries such as France, Italy and Spain who fall short of NATO’s defense spending target argue that receiving “free money” from Brussels is the only way for them to drastically increase military spending without making politically unpopular cuts to other budget areas.  Merz warmed to this idea during the election campaign — and supporters hope that his backing will defeat opposition from frugal allies such as Austria and the Netherlands. There are many less controversial ideas on the table, such as exempting defense from EU spending rules or increasing military funds in the EU’s new multiyear budget that will come into force in 2028. But supporters of common debt argue that none of these will be enough to meet the scale of the challenge alone.  Select another policy area -------------------------------------------------------------------------------- COMPETITION Germany’s industrial giants are flailing and shedding jobs. Merz will be expected to act. His party’s manifesto called for “Made in Germany” champions and for a modern antitrust and competition law “that uses a global market as a benchmark,”  references to the Siemens-Alstom deal to create a European rail champion that was blocked by the EU. Merz is also a fan of cross-border state-funded projects, known as Important Projects of Common European Interest, saying he wants to use such instruments “as effectively as possible in Germany.” The country has been one of the driving forces of several IPCEIs, which have led to the public financing of hydrogen, batteries and cloud infrastructure. He also wants Germany’s national rail company Deutsche Bahn to be streamlined and restructured, with infrastructure and transport separated “to increase competition.” Given the dire state of German rail, this could prove to be a popular move. Select another policy area -------------------------------------------------------------------------------- Advertisement TECH Merz sees digital transformation as the key to Germany’s industrial revival and wants to turn the country into Europe’s tech front-runner. His plan is to earmark 3.5 percent of gross domestic product to research and development by 2030, with a special focus on space, quantum computing, artificial intelligence and cloud technologies. Key proposals include setting up a standalone digital ministry (currently merged with transport) and offering new startups temporary relief from red tape. Merz has also said that bureaucracy in Berlin and Brussels needs to be drastically reduced for Germany to regain its competitive edge. This stance is in line with the center-right views in EU institutions, where a major push to simplify digital rules is underway.  Select another policy area -------------------------------------------------------------------------------- CYBER In the months leading up to the German election, Berlin’s lawmakers looked to toughen up restrictions on (and potentially ban) high-risk vendors — cough, Chinese suppliers like Huawei — to implement the EU’s rules on cybersecurity in critical sectors. With work on the draft law rolling over, Merz will be faced with a decision on whether to crack down on Chinese tech in Germany’s critical sectors. His CDU party said that it wants to maintain close economic relations with China, but also committed to taking steps to protect critical infrastructure and security relevant technology.   The party manifesto also outlined a sweeping change of course in terms of data protection policy, encouraging more “pragmatic” rules that allow data to be used for innovation and growth, as well as law enforcement.  Select another policy area -------------------------------------------------------------------------------- HEALTH A Merz win signals a blow for Germany’s cannabis users, after the CDU leader pledged to reverse last year’s partial decriminalization of the drug. He blames the new policies, which allow adults to possess up to 25 grams of cannabis in public and grow three plants per household, for an increase in drug-related crime.  It could be good news for fans of the EU’s new rules to digitalize European health records, the European Health Data Space. In an attempt to force notoriously analog Germans away from paper files, Merz has suggested that anyone who stores their data in an electronic patient file could receive a discount on health insurance contributions.  Select another policy area -------------------------------------------------------------------------------- Victor Jack, Karl Mathiesen, James Fernyhough, Joshua Posaner, Jordyn Dahl, Koen Verhelst, Douglas Busvine, Ben Munster, Gregorio Sorgi, Aude van den Hove, Mathieu Pollet, Eliza Gkritsi, Ellen O’Regan, Mari Eccles and Hanne Cokelaere contributed to this article.

Exxon Mobil Chair and CEO Darren Woods urged the incoming Trump administration to avoid making turbulent climate policy swings — and he pushed the president-elect to reject carbon border taxes favored by some GOP lawmakers. In an interview with POLITICO, Woods signaled that one of the most powerful players in the energy industry might serve as a moderating influence in Washington, even as Republicans seek to dismantle Biden-era climate policies. The future of the Inflation Reduction Act and other clean-energy programs is one of the most important questions hanging over the incoming administration. “I don’t think the challenge or the need to address global emissions is going to go away,” Woods said. “Anything that happens in the short term would just make the longer term that much more challenging.” Woods made the comments via telephone from the COP29 climate negotiations in Baku, Azerbaijan, just days after President-elect Donald Trump won the White House with a vow to turbocharge United States’ fossil fuel production and roll back Biden policies aimed at reducing greenhouse gas pollution and speeding the growth of clean energy. Trump is widely expected to withdraw the U.S. from the 2015 Paris climate agreement, and his election has scrambled climate diplomacy at the annual talks. Despite the forecasts that the world is on pace to set a new annual high temperature for the second year in a row, Trump has repeatedly called climate change a “hoax,” demonized policies promoting electric vehicles and castigated wind and solar energy. But some members of his party, including a sizable number of Republicans in Congress, have spoken out against wholesale repeal of the IRA, citing the economic benefits it has delivered to their districts. Woods, who took the top job at Exxon after his predecessor Rex Tillerson became Trump’s first secretary of State, said he opposed carbon border tariffs, which would impose fees on imports that are produced through processes with higher carbon emissions than in the U.S. That type of tariff has been touted by Robert Lighthizer, who was Trump’s first-term trade representative, as well as some Republicans in Congress who said it would benefit U.S. companies whose products are cleaner than their foreign competitors. It is widely viewed as a response to the European Union’s carbon border adjustment mechanism, which would tax imported raw materials from countries that do not have a price on carbon emissions. “I think it’s a bad idea. It’s a really bad idea,” Woods said. “I think carbon border adjustment is going to introduce a whole new level of complexity and bureaucratic red tape. I don’t think it’s going to be very effective.” Instead, he said, a regulatory system based on the carbon intensity of products would be a better solution. That would still require the government to enforce some basic accounting standards and a framework assessing the carbon dioxide footprint across a range of products. “Regulation will play a really important part of that,” Woods said. The EU’s carbon border adjustment mechanism has emerged as a COP29 flash point. China, Brazil, India and South Africa lodged a formal complaint against governments using trade measures to curb emissions, arguing it raised the costs of deploying green technology in low- and middle-income countries. Several countries initially raised similar objections to Biden’s IRA, contending it subsidized U.S.-based companies while shutting out foreign competitors. Trump has vowed to scrap many of those incentives. Woods said Exxon would adapt to whatever happens with IRA provisions that benefit the oil and gas industry, such as tax incentives for carbon capture, utilization and storage technology. “I’ve been advising that we have some level of consistency,” Woods said. “One of the challenges with this polarized political environment we find ourselves in is the impact of policy switching back and forth as political cycles occur and elections happen and administrations change. That’s not good for the economy.” Woods said Biden’s energy policies had amounted to “limiting the supply of traditional sources of energy and trying to force through expensive alternatives,” though he cautioned against complete about-face on climate change. He warned American industries that fail to address environmental performance during Trump’s second term risk worsening the problem. “We all have a responsibility to figure out, given our capabilities and ability to contribute, how can we best do that,” Woods said. “How the Trump administration can contribute in this space is to help establish the right, thoughtful, rational, logical framework for how the world starts to try to reduce the emissions.” Woods’ preferred approach on carbon intensity echoes several legislative proposals floating around Congress. Those are similar to other models that effectively reduced sulfur content in marine fuel oil and automotive diesel. “Once we can specify carbon intensity, you can then unlock the capability of industry to meet those carbon intensity specifications, and every government can set that level based on their set of circumstances in their country,” Woods said. Exxon has also launched a carbon capture business that aims to collect emissions of the greenhouse emitted from petroleum operations and store them in underground reservoirs in Louisiana and Texas as well as the seabed below the Gulf of Mexico. That technology has been embraced by the oil sector and received lucrative tax incentives in the Inflation Reduction Act, though it has been criticized by environmental groups. Despite Biden’s focus on green policies, the U.S. still became the world’s top oil and gas producer during his term and hit production levels unequaled by any other country in history. The U.S., the world’s largest economy and second-largest emitter of planet-heating gases, remains off track of Biden’s goal to cut emissions in half this decade, relative to 2005 levels.