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.

At New York Climate Week in September, opinion leaders voiced concern that high-profile events often gloss over the deep inequalities exposed by climate change, especially how poorer populations suffer disproportionately and struggle to access mitigation or adaptation resources. The message was clear: climate policies should better reflect social justice concerns, ensuring they are inclusive and do not unintentionally favor those already privileged.  We believe access to food sits at the heart of this call for inclusion, because everything starts with food: it is a fundamental human right and a foundation for health, education and opportunity. It is also a lever for climate, economic and social resilience.  > We believe access to food sits at the heart of this call for inclusion, > because everything starts with food This makes the global conversation around food systems transformation more urgent than ever. Food systems are under unprecedented strain. Without urgent, coordinated action, billions of people face heightened risks of malnutrition, displacement and social unrest.   Delivering systemic transformation requires coordinated cross-sector action, not fragmented solutions. Food systems are deeply interconnected, and isolated interventions cannot solve systemic problems. The Food and Agriculture Organization’s recent Transforming Food and Agriculture Through a Systems Approach report calls for systems thinking and collaboration across the value chain to address overlapping food, health and environmental challenges.   Now, with COP30 on the horizon, unified and equitable solutions are needed to benefit entire value chains and communities. This is where a systems approach becomes essential.  A systems approach to transforming food and agriculture  Food systems transformation must serve both people and planet. We must ensure everyone has access to safe, nutritious food while protecting human rights and supporting a just transition.   At Tetra Pak, we support food and beverage companies throughout the journey of food production, from processing raw ingredients like milk and fruit to packaging and distribution. This end-to-end perspective gives us a unique view into the interconnected challenges within the food system, and how an integrated approach can help manufacturers reduce food loss and waste, improve energy and water efficiency, and deliver food where it is needed most.   Meaningful reductions to emissions require expanding the use of renewable and carbon-free energy sources. As outlined in our Food Systems 2040 whitepaper,1 the integration of low-carbon fuels like biofuels and green hydrogen, alongside electrification supported by advanced energy storage technologies, will be critical to driving the transition in factories, farms and food production and processing facilities.   Digitalization also plays a key role. Through advanced automation and data-driven insights, solutions like Tetra Pak® PlantMaster enable food and beverage companies to run fully automated plants with a single point of control for their production, helping them improve operational efficiency, minimize production downtime and reduce their environmental footprint.  The “hidden middle”: A critical gap in food systems policy  Today, much of the focus on transforming food systems is placed on farming and on promoting healthy diets. Both are important, but they risk overlooking the many and varied processes that get food from the farmer to the end consumer. In 2015 Dr Thomas Reardon coined the term the “hidden middle” to describe this midstream segment of global agricultural value chains.2   This hidden middle includes processing, logistics, storage, packaging and handling, and it is pivotal. It accounts for approximately 22 percent of food-based emissions and between 40-60 percent of the total costs and value added in food systems.3 Yet despite its huge economic value, it receives only 2.5 to 4 percent of climate finance.4  Policymakers need to recognize the full journey from farm to fork as a lynchpin priority. Strategic enablers such as packaging that protects perishable food and extends shelf life, along with climate-resilient processing technologies, can maximize yield and minimize loss and waste across the value chain. In addition, they demonstrate how sustainability and competitiveness can go hand in hand.  Alongside this, climate and development finance must be redirected to increase investment in the hidden middle, with a particular focus on small and medium-sized enterprises, which make up most of the sector.   Collaboration in action  Investment is just the start. Change depends on collaboration between stakeholders across the value chain: farmers, food manufacturers, brands, retailers, governments, financiers and civil society.  In practice, a systems approach means joining up actors and incentives at every stage.5 The dairy sector provides a perfect example of the possibilities of connecting. We work with our customers and with development partners to establish dairy hubs in countries around the world. These hubs connect smallholder farmers with local processors, providing chilling infrastructure, veterinary support, training and reliable routes to market.6 This helps drive higher milk quality, more stable incomes and safer nutrition for local communities.  Our strategic partnership with UNIDO* is a powerful example of this collaboration in action. Together, we are scaling Dairy Hub projects in Kenya, building on the success of earlier initiatives with our customer Githunguri Dairy. UNIDO plays a key role in securing donor funding and aligning public-private efforts to expand local dairy production and improve livelihoods. This model demonstrates how collaborations can unlock changes in food systems.  COP30 and beyond  Strategic investment can strengthen local supply chains, extend social protections and open economic opportunity, particularly in vulnerable regions. Lasting progress will require a systems approach, with policymakers helping to mitigate transition costs and backing sustainable business models that build resilience across global food systems for generations to come.   As COP30 approaches, we urge policymakers to consider food systems as part of all decision-making, to prevent unintended trade-offs between climate and nutrition goals. We also recommend that COP30 negotiators ensure the Global Goal on Adaptation include priorities indicators that enable countries to collect, monitor and report data on the adoption of climate-resilient technologies and practices by food processors. This would reinforce the importance of the hidden middle and help unlock targeted adaptation finance across the food value chain.  When every actor plays their part, from policymakers to producers, and from farmers to financiers, the whole system moves forward. Only then can food systems be truly equitable, resilient and sustainable, protecting what matters most: food, people and the planet.  * UNIDO (United Nations Industrial Development Organization)  Disclaimer POLITICAL ADVERTISEMENT * The sponsor is Tetra Pak * The ultimate controlling entity is Brands2Life Ltd * The advertisement is linked to policy advocacy regarding food systems and climate policy More information here. https://www.politico.eu/7449678-2

Volodymyr Zelenskyy is under mounting pressure from critics to keep the lights and heating on while Vladimir Putin ramps up his military assault on Ukraine’s energy supply. The Ukrainian president is fearful of a public backlash over likely prolonged blackouts this winter and is trying to shift the blame, said the former head of Ukraine’s state-owned national power company. Thirty-nine-year-old Volodymyr Kudrytskyi, who led Ukrenergo until he was forced to resign last year amid infighting over political control of the energy sector, said he’s one of those whom the President’s Office is looking to scapegoat. During an exclusive interview with POLITICO, he predicted Ukraine will face a “very difficult winter” under relentless Russian bombardment — and argued Kyiv’s government has made that worse through a series of missteps. Adding fuel to his clash with Zelenskyy’s team, Kudrytskyi was charged last week with embezzlement, prompting an outcry from Ukraine’s civil society and opposition lawmakers.  They say Kudrytskyi’s arraignment involving a contract — one of hundreds — he authorized seven years ago, when he was a deputy director at Ukrenergo, is a glaring example of the aggressive use of lawfare by the Ukrainian leadership to intimidate opponents, silence critics and obscure their own mistakes. Kudrytskyi added he has no doubt that the charges against him would have to be approved by the President’s Office and “could only have been orchestrated on the orders of Zelenskyy.” Zelenskyy’s office declined to respond to repeated requests from POLITICO for comment. Before his arrest, Kudrytskyi said he was the subject of criticism “by anonymous Telegram channels that support the presidential office with false claims I had embezzled funds.” He took that as the first sign that he would likely be targeted for harsher treatment. Kudrytskyi, who was released Friday on bail, said the criminal charges against him are “nonsense,” but they’ve been leveled so it will be “easier for the President’s Office to sell the idea that I am responsible for the failure to prepare the energy system for the upcoming winter, despite the fact that I have not been at Ukrenergo for more than a year now.” “They’re scared to death” about a public outcry this winter, he added. COMPETING PLANS That public backlash against leadership in Kyiv will be partly justified, Kudrytskyi said, because the struggle to keep the lights on will have been exacerbated by tardiness in rolling out more decentralized power generation. Kudrytskyi said Ukraine’s energy challenge as the days turn colder will be compounded by the government’s failure to promptly act on a plan he presented to Zelenskyy three years ago. The proposal would have decentralized energy generation and shifted away, as quickly as possible, from a system based on huge Soviet-era centralized power plants, more inviting targets for Russian attacks.   Thirty-nine-year-old Volodymyr Kudrytskyi said he’s one of those whom the President’s Office is looking to scapegoat. | Kirill Chubotin/Getty Images The plan was centered on the idea that decentralizing power generation would be the best way to withstand Russian missile and drone attacks. Those have redoubled to an alarming scale in recent weeks with, some days, Russia targeting Ukraine’s energy infrastructure with 500 Iranian-designed drones and 20 to 30 missiles in each attack. Instead of quickly endorsing the decentralization plan, Zelenskyy instead approved — according to Kudrytskyi — a rival scheme backed by his powerful Chief of Staff Andriy Yermak to “create a huge fund to attract hundreds of millions of foreign investment for hydrogen and solar energy.” Last year the government shifted its focus to decentralization, eventually taking up Kudrytskyi’s plan. “But we lost a year,” he said.  He also said the slow pace in hardening the country’s energy facilities to better withstand the impact of direct hits or blasts — including building concrete shelters to protect transformers at power plants — was a “sensational failure of the government.” Ukrenergo, Kudrytskyi said, started to harden facilities and construct concrete shelters for transformers in 2023 — but little work was done by other power generation companies. DEMOCRATIC BACKSLIDING Kudrytskyi was abruptly forced to resign last year in what several Ukrainian energy executives say was a maneuver engineered by presidential insiders determined to monopolize political power. His departure prompted alarm in Brussels and Washington, D.C. — Western diplomats and global lenders even issued a rare public rebuke, breaking their normal public silence on domestic Ukrainian politics. They exhorted Kyiv to change tack. So far, international partners have made no public comments on Kudrytskyi’s arrest and arraignment. But a group of four prominent Ukrainian think tanks issued a joint statement on Oct. 30, the day after Kudrytskyi’s arraignment, urging authorities to conduct investigations with “the utmost impartiality, objectivity, and political neutrality.”  The think tanks also cautioned against conducting political persecutions. In their statement they said: “The practice of politically motivated actions against professionals in power in any country, especially in a country experiencing the extremely difficult times of war, is a blow to statehood, not a manifestation of justice.” The embezzlement case against Kudrytskyi has been described by one of the country’s most prominent anti-corruption activists, Daria Kaleniuk, head of the Anti-Corruption Action Center, as not making any legal sense. She argued that the prosecutor has failed to offer evidence that the former energy boss enriched himself in any way and, along with other civil society leaders, said the case is another episode in democratic backsliding. Overnight Sunday, Russia launched more attacks targeting Ukraine’s energy infrastructure, striking at regions across the country. According to Zelenskyy, “nearly 1,500 attack drones, 1,170 guided aerial bombs, and more than 70 missiles of different types were used by the Russians to attack life in Ukraine just this week alone.” Unlike previous wartime winters, Russian forces this time have also been attacking the country’s natural gas infrastructure in a sustained campaign.  Since being forced to resign from Ukrenergo, Kudrytskyi hasn’t been shy about highlighting what he says is mismanagement of Ukraine’s energy sector. For that he has been attacked on social media for being unpatriotic, he said. But he sees it differently. “Most Ukrainians understand the government should be criticized even during wartime for mistakes because otherwise it would cause harm to the country,” he said.

France and Germany on Friday agreed to better integrate their energy markets and find common ground on EU green laws as part of a sweeping bilateral reset following years of bitter feuding over energy policy. The EU’s two biggest economies gave their political backing to a new cross-border power line and the long-stalled “Southwestern” hydrogen pipeline network connecting Spain, Portugal, France and Germany at a ministerial meeting in Toulon, also attended by French President Emmanuel Macron and German Chancellor Friedrich Merz. The summit comes after years of friction between the countries over energy policy, including regarding subsidies for energy-intensive industries and nuclear power. Now, an agreement at the 25th Franco-German Council of Ministers “seeks to reconcile policy differences and promote joint initiatives that can serve as a model for broader EU collaboration,” according to a press release. The new “economic agenda” — spanning defense, industrial and digital policy — includes a pledge to conduct a joint study with Poland by 2026 on optimizing grid investments, and collaborate more closely on electricity-related rules such as network charges in order to lower energy prices. Notably, the two capitals also vowed to “establish a cooperative working process” on efforts to slash red tape for businesses and align their climate policies. In practice, that “might” lead to joint proposals to amend existing EU energy laws, the statement continued. It also addresses upcoming legal targets for 2040 that promote “non-discrimination among all … low-carbon energy technologies” — a common euphemism for nuclear power. France, which relies heavily on atomic energy, has long fought for nuclear to take a more prominent role in EU climate goals. In recent months, Paris pushed Brussels to adopt a renewables target for 2040 that also includes nuclear — an effort EU energy chief Dan Jørgensen has so far resisted.

BRUSSELS — An “aviation industry declaration” on sustainable fuel, due to be given to the EU’s transport chief next week, was actually drafted by European Commission officials and sent to aviation lobbies for endorsement, several lobbyists told POLITICO. The so-called Le Bourget Declaration backs the Commission’s targets for increasing the use of sustainable aviation fuel, which are included in the ReFuelEU legislation, starkly contrasting with the recent request from major European airlines to delay. It is set to be presented to Transport Commissioner Apostolos Tzitzikostas during the Paris Air Show at Le Bourget Airport, which starts on Monday. “This didn’t come from us; this came from DG MOVE,” a lobby representative told POLITICO, speaking on condition of anonymity. DG MOVE is the Commission’s department for mobility and transport. “A couple of weeks ago, DG MOVE contacted us and said, ‘We want you to sign this and give it to the Commissioner,’” the lobbyist said. “Officially, it’s our initiative, but unofficially it came from the Commission, which is highly unusual.” The Commission did not respond to a request for comment. Other lobbyists confirmed they received the document from DG MOVE weeks ago. They responded by asking that the draft be integrated with actual industry requests, such as introducing a tradability system for SAF called book-and-claim, which the Commission has so far opposed. A draft of the document, seen by POLITICO, includes this request. “Now it’s basically a Frankenstein that carries all sorts of different messages,” said another lobbyist. “In the end, it’s probably not going to achieve anything because the main message has been diluted,” the sector representative added. The industry paper of dubious origin recommends various “calls for immediate action” to be included in the upcoming Sustainable Transport Investment Plan, which Tzitzikostas will announce later this year. According to an airline representative, the Commission’s efforts to influence the message of the aviation industry are an attempt to repair the communication damage inflicted on ReFuelEU — the EU’s flagship legislation to decarbonize aviation — at the Airlines for Europe summit in late March. It is set to be presented to Transport Commissioner Apostolos Tzitzikostas during the Paris Air Show at Le Bourget Airport. | Ronald Wittek/EPA On that occasion, the CEOs of major airlines, including Lufthansa, Air France-KLM, Ryanair and British Airways’ parent company, IAG, called for a delay in what they called “not realistic” mandates aimed at increasing the role of SAF — which is currently mainly made from used cooking oil — in the jet fuel mix. The first SAF mandate to include at least 2 percent SAF in the jet fuel mix sold to airlines took effect on Jan. 1. But airlines are complaining that they are paying twice the expected price as suppliers are charging them additional “compliance fees” in addition to SAF, which already costs three times the price of fossil kerosene. In 2030, fuel suppliers will be requested to provide jet fuel that is at least 6 percent SAF, including 1.2 percent of synthetic e-SAF made from renewable hydrogen and captured CO2. No final investment decisions have been made on any e-SAF projects in Europe. “The Commissioner doesn’t want to replicate the disaster of the automotive sector,” said the carrier lobbyist, referring to the ban on selling new gas and diesel vehicles from 2035, a measure openly opposed by many in the car industry. “He wants to ensure that airlines continue to support the measures adopted” with regard to aviation. The declaration proposes several actions, including the joint creation of a revenue certainty instrument by the Commission and member countries to overcome the mismatch between the long-term production and short-term use of e-SAF. This mechanism could take the form of contracts for difference, demand aggregation mechanisms, or double-sided auctions, and it should be operational by the end of 2026 to reduce the risk of investing in e-SAF. Another recommendation is to introduce targeted simplification measures for early movers and small-to-medium businesses investing in SAF to reduce the administrative burden. Representatives from the lobby groups who received the document told POLITICO they intend to sign it. Martina Sapio contributed reporting.

LONDON — The U.K. government is in talks with its French counterparts about purchasing back three nuclear sites from state-owned energy giant EDF, as Whitehall looks to take control of the upcoming expansion of nuclear power. U.K. ministers are discussing buying up Bradwell B, Heysham and Hartlepool, a French government official confirmed to POLITICO. “There have been discussions. For the moment, no decision has been taken and discussions are continuing,” the official said. Two senior industry figures based in the U.K., familiar with government planning and granted anonymity to discuss sensitive plans, also said negotiations over the purchase of the three sites were ongoing. Energy Secretary Ed Miliband and French Minister for Industry and Energy Marc Ferracci discussed the negotiations on the margins of the International Energy Agency Summit in London earlier this week, the official added. Neither the Department for Energy Security and Net Zero nor the U.K. Treasury responded to a request for comment ahead of publication. The next key moment could come in July as part of a proposed French-U.K. summit. Any move to bring the sites into state ownership would come as the U.K. mulls the most ambitious revival of nuclear power in a generation. At a conference last December, Miliband insisted nuclear was essential for an an “all of the above approach” to energy security and low-carbon power, and told investors “my door is open” for future nuclear projects, as the U.K. bids to hit its legally-binding target of net zero carbon emissions by 2050. “We need nuclear, we need wind, we need solar, we need batteries … we need hydrogen, we need carbon capture. And nuclear has a particular role to play in finding clean, stable and reliable power,” he said. THE ‘OBVIOUS’ SITES All three sites are owned by French firm EDF, a company in which the French state is the sole shareholder, handed over in a deal struck in 2023. An EDF spokesperson declined to comment on any discussions but said: “EDF would welcome developments that enable ongoing employment opportunities at our sites, once existing stations close. “Our sites have numerous benefits, including a skilled workforce, grid connections and supportive communities that are used to nuclear power and the economic benefits the existing stations bring.”  The U.K. has not built a new nuclear power plant since Sizewell B was opened in 1995. The much-delayed Hinkley Point C is at risk of not being completed until 2031, and the government is still weighing up a final investment decision for sister plant Sizewell C. Meanwhile Great British Nuclear (GBN), the arms-length body set up under the last Conservative government, is overseeing the final stages of the late-running competition to build mini-nukes in the U.K., known as small modular reactors (SMRs). GBN owns two sites — Oldbury and Wylfa — which were brought into state ownership by former Chancellor Jeremy Hunt last year.  A decision on awarding SMR contracts is now expected this summer. If the government goes ahead with its plans to boost nuclear capacity and award SMR contracts to multiple bidding companies, it will need more than two sites to host the work. “If the government are going to expand gigawatts [capacity] as well as SMRs, they’ll need more sites, and those [three sites] are the obvious ones left over from EN-6 [the U.K.’s shortlist for projects],” a third industry figure said. Heysham and Hartlepool both include operating nuclear power plants, which are set for decommissioning in stages across 2027 and 2030 respectively. By contrast, Bradwell B, once earmarked for new nuclear, is a now vacant plot of land. The site is still owned by EDF but is currently being leased by China General Nuclear (CGN) Power, which stopped advancing their mooted project in 2022. This means any takeover of the site could include a payout to the Chinese state-backed company, in line with £100 million-plus buyout of CGN’s stake in Sizewell C in 2022. The developments could also pave the way for Wylfa to be reserved for a third gigawatt scale power plant, alongside Hinkley Point C and Sizewell C.

BRUSSELS — The EU needs to build more tanks — and there’s no reason why those tanks can’t be green. In a bid to save its decaying steel and metal industries, the EU has formulated a plan to protect the sector against unfair competition from abroad, high energy prices and a looming trade war with the U.S. — all while helping it go green.  With this strategy — which is largely based on leveraging the EU’s arsenal of trade measures against cheaper foreign products and subsidizing the sector’s decarbonization — Brussels is hoping that saving metals manufacturing will also boost the defense industry and ultimately, keep Europe safe.    “A main battle tank contains 50 to 60 tonnes of high-quality steel, a self-propelled artillery system, up to 100 tonnes, a fighter aircraft 3 tonnes of aluminium,” the Commission writes in the plan, adding that “a stable and resilient supply chain for these materials is critical to strengthening the European Defence Technological and Industrial Base, ensuring the EU’s preparedness and internal security.” The 19-page document acknowledges how central steel has been for European integration, with the bloc’s first steps towards cooperation hailing back to the European Coal and Steel Community formed after World War II. “The choice was clear, Europe had to save its steel. We owe this to our history. Europe started with steel,” EU industry chief Stéphane Séjourné said at a press conference on Wednesday, referring to the same landmark 1951 agreement which eventually evolved into the European Union.  What started as a peace-building project by tying French and German interests together is now rapidly turning into a blueprint for manufacturing deterrence against an expansionist Russia unrestrained by U.S. pledges to come to Europe’s defense.  It was no coincidence that the EU revealed major plans on defense, finance and industry on the same day. The bloc’s rude awakening in the first months of Donald Trump’s second term as U.S. President means all the issues Europe faces have been dialed up to twelve. In particular the steel and aluminum industries will feel the impact of Trump’s imposition of 25 percent tariffs on all U.S. imports of the metals a week ago. Foremost a signal to the heavy industry that the Commission recognizes their problems, the Steel and Metals Action Plan paints sectors in near-inevitable decline. “The EU is the only major steelmaking region seeing a decrease in capacity,” the plan warns. The bloc’s rude awakening in the first months of Donald Trump’s second term as U.S. President means all the issues Europe faces have been dialed up to twelve. | Chip Somodevilla/Getty Images In the long term, Brussels hopes that focusing on producing low-carbon steel with cheaper locally produced renewable energy, hydrogen, and locally recycled scrap will give the industry an edge against its competitors.   UNPRECEDENTED STEPS If the defense industry and employment figures are the ‘why,’ the ‘how’ is more complicated.  The plan includes measures in the fields of energy, trade and sustainability. Perhaps most pressing, the Commission promises it will find a way to replicate safeguard measures intended to keep shielding the steel sector from imports shut out of the U.S. by Trump’s new tariffs. Safeguards can legally only last for eight years, so replacing them will require some legal creativity on the part of the Commission. The Steel Action Plan promises a proposal in the third quarter. The Commission also promises “to proactively open investigations based on a “threat of injury.” That is eurospeak for opening trade probes into dumping or subsidies like the now-famous case on Chinese electric vehicles. Using the legal term “threat of injury” means the EU doesn’t have to wait until an industry is already feeling the pressure. As an umbrella measure, steel and aluminum might soon be classified based on where they were originally “melted and poured,” not in which country they got altered after that. This would allow the EU to tackle circumvention of existing duties on imports. “Is it enough? History will tell,” a Commission official said, after being granted anonymity to discuss the plan candidly.  “But if we would have promised this a few years ago, no one would have believed it,” they said, referring to the Commission considering restrictions on scrap metal exports, tracking where steel is originally melted and poured, and erecting safeguards for aluminum. Those last two points are completely new measures. GREEN AND SECURE Brussels also gave the most steel-friendly nod yet about upcoming changes to the EU’s carbon-border tax known as CBAM, which places a levy on certain imports from countries without an equivalent carbon price. The Commission promised to expand the carbon tax to also cover specific products made from steel and aluminum — not just the basic metals. That would close what industry groups say is a loophole firms exploit to evade taxes. Early reaction from industry was positive. “We are grateful that the Commission has clearly recognized the strategic importance of the European steel industry to the EU’s sovereignty, security, and competitiveness,” said Henrik Adam, president of steelmakers’ association Eurofer. Europe’s top aluminum lobbyist Paul Voss on Tuesday noted “a completely new, different and better dynamic of exchange with the European Commission,” adding: “Now we need actual deliverables.” Brussels hopes that focusing on producing low-carbon steel with cheaper locally produced renewable energy, hydrogen, and locally recycled scrap will give the industry an edge against its competitors.  | Joseph Prezioso/Getty Images Green groups, meanwhile, welcomed the emphasis on helping heavy industries go green. “This is good news: Accelerating the decarbonization of the steel sector presents the best bet to securing a long-term future for the sector in Europe,” said Johanna Lehne, associate director for clean economy at climate think tank E3G. “We need to see much more concerted industrial policy driving the transition at pace: scaling first-generation near-zero emission pilots, growing demand through lead markets and securing low-cost abundant renewable electricity for the sector,” she added. 

NEUSS, Germany — On the left bank of the Rhine, the European Union’s third-largest aluminum smelter sits idle. No smoke rises from its four spindly chimneys; the giant pots, once filled to the brim with molten silvery liquid, have long cooled. They won’t fire up again.  When the Rheinwerk plant stopped smelting in 2023, citing exorbitant energy prices, it sent shockwaves through a country haunted by the threat of deindustrialization. The shutdown meant job losses and ended a 60-year tradition in Neuss, a midsized German city halfway between Cologne and the Dutch border. But behind three silent production halls, the factory now hums with round-the-clock activity. Furnaces roar, shredders rumble and electric trucks zip around the foundry. The Rheinwerk is still producing aluminum ingots the length of a minibus.  There’s just one difference: These metal blocks are made from trash — making them less energy-intensive and more sustainable than the freshly smelted stuff, known as primary aluminum. “We’re building one recycling furnace after another,” said Volker Backs, managing director of Speira, the company running the Rheinwerk. “We take the green transition seriously here.” It wasn’t an easy decision, said Backs, but a necessary one — for both profit and planet. “We were of course sorry that we couldn’t maintain primary production of aluminum here,” he added, “but we see recycling as our future.”  One of the Rheinwerk’s giant furnaces is used for re-melting aluminium waste. | Zia Weise/POLITICO The same hard choice awaits companies and governments across the continent: Prop up products and practices that are no longer competitive, or abandon them. Complicating the matter are soaring costs, fierce competition from China and a looming trade war with the United States.   Companies need to decide whether to ditch or pour money into parts of their businesses whose green transition will cost billions. And governments need to decide how — and whom — they help. Do they bet on future-oriented enterprises or retain creaky industrial sites? Europe’s strained public purses won’t subsidize it all.  On Wednesday, the European Commission will offer an initial answer with its Clean Industrial Deal. The EU executive’s plan will propose much-needed measures to slash energy prices and stimulate investment. But it will sidestep the thorniest question: Which sectors and products can and should the EU save — and which should it let die? Brussels can’t avoid this question forever. The response will determine not only what the EU’s industry and job market look like in the coming decades but also the bloc’s autonomy: Where it gets the aluminum for its wind turbines, the cement for its buildings or the steel for its weapons.  “It’s something I don’t see enough in the discourse — a transition means you need to make choices, and those choices need to be strategic and explicit,” said Domien Vangenechten, who researches European industrial policy at environmental think tank E3G. “And you cannot save everyone.”  THE CHOICES FACING EUROPE  Europe has to make those choices now.  Skyrocketing energy prices hammered the continent’s long-struggling manufacturing industry after Russia invaded Ukraine in 2022. Some companies, notably in the steel sector, say irreversible decline can only be staved off with immediate political and financial support.  Backs recalls that as electricity costs quadrupled in 2022, the power price to produce one metric ton of primary aluminum suddenly hit more than €5,000 — double the metal’s price on the global market. “You don’t have to think very long about whether it’s still worth it,” he said.  The price shock came at the worst possible time.  One of Speira’s employees painted this mural in the Rheinwerk’s sorting hall. | Zia Weise/POLITICO Unlike previous industrial transformations, the green transition has a deadline thanks to planetary physics: The faster we stop pumping carbon dioxide into the air, the less severe climate change will be. Scientists say that zeroing out global net emissions by 2050 will prevent the worst, and the EU has enshrined this target date in law.  Energy-intensive manufacturing sectors — a category including steel, cement, aluminum, chemicals and more — account for more than a fifth of the EU’s greenhouse gas emissions, and their transition will be lengthy and expensive. They’ll have to change their production processes, use clean energy, source more recycled materials and capture the remaining CO2. As modernizing a factory takes years, companies need to know now what’s worth investing in. They want certainty about the conditions they’ll face and what support they’ll receive. The Commission’s Clean Industrial Deal seeks to address many of the manufacturers’ concerns, proposing made-in-EU quotas to stimulate demand and new measures to upgrade power grids and lower prices.  At the same time, the EU executive steers well clear of picking winners and losers in the green transition.  Yet there are urgent decisions to be made about which industries the EU wants to retain, and where it’s cheaper and more effective to rely on imports. Former European Central Bank leader Mario Draghi spelled it out in his sweeping report on boosting the bloc’s competitiveness. “There are some technologies, like solar panels, where foreign producers are too far ahead and attempting to capture production in Europe will only set back decarbonization,” he said in a speech presenting the report to the European Parliament last year.  But, he added, there are other sectors “where we do not want to be fully dependent on foreign technology for strategic reasons, and so it is key to keep the know-how in Europe.” ALUMINUM’S ROLE Where on that divide primary aluminum production will land is an open question. The metal is in everything from soda cans and window frames to military aircraft and missiles. Demand is also expected to soar in the coming decades given the importance of the lightweight material for climate-friendly technologies like wind turbines and electric vehicles.  The EU has recognized its strategic role, adding aluminum to its critical raw materials list. NATO followed suit last year, warning that the alliance’s supply of the metal is at “very high risk” of disruption.  Yet manufacturing fresh aluminum requires more electricity than any other industrial production method — more than double the average German’s annual power consumption for each ton of metal. (At the Rheinwerk, a massive connection cable allowed the factory to use as much power as Neuss’ 150,000 inhabitants combined.) Once the EU’s power grids are fully decarbonized, this process could run on 100 percent green energy. Plus, once expensive fossil fuels are out of the system, power prices should go down.  Manufacturers can’t wait for that. EU companies pay two or three times as much for electricity as their Chinese and American rivals, and the 2022 price shock was the final straw for many.  Speira was only one of many smelters across Europe that curtailed operations during the energy crisis. Within two years, the continent’s primary aluminum production halved.  By contrast, Europe’s production of so-called secondary aluminum, manufactured using recycled metal, has steadily increased. Its advantages are obvious: Secondary production requires 95 percent less energy than primary production — making for a significantly lower carbon footprint. One ton of European-produced primary aluminum emits 6.7 tons of CO2 during manufacturing. That drops to as little as 0.5 tons for aluminum made entirely from remelted waste. And in theory, aluminum is infinitely recyclable.  That isn’t to say secondary aluminum producers don’t face challenges. Key EU aluminum buyers — such as carmakers — are in trouble, affecting short-term demand. The sector is also facing low-cost competition from China, which has accelerated aluminum production. Plus, U.S. President Donald Trump just announced 25 percent tariffs on aluminum, hitting EU companies’ exports.  But production costs, particularly for energy, are the top problem for European industry — and some argue the price of keeping primary production afloat just isn’t worth it.  Industry associations and trade unions, however, warn against abandoning domestic primary production.  For now, the EU cannot cover its demand with recycled aluminum alone, said Rob van Gils, president of Germany’s aluminum association. One day that might be possible, given all the metal in use. But while the average soda can ends up back at a recycling facility within a few months, the material in window frames or wind turbines won’t become scrap for decades.  Investments in recycling capacity “will pay off over time,” van Gils said. “But we still have to keep this primary process in Europe, because otherwise we will be completely dependent on imports.”  That’s bad for Europe’s self-sufficiency — and the planet: Primary aluminum produced outside of Europe tends to be far more carbon-intensive. Chinese aluminum spews around twice the emissions of EU-made metal. BRUSSELS FACES CHOICE Whether it’s worth keeping primary aluminum production in the EU is ultimately a political choice of the sort Brussels is rather bad at.  The Commission’s power to make strategic decisions about the future of industry is limited. And even where the EU executive can make decisions, it needs buy-in from a majority of national governments.   The entrance to the Rheinwerk aluminium factory. | Zia Weise/POLITICO “Trying to come up with a holistic vision is challenging,” Vangenechten said. “Trying to come up with a holistic vision and get 27 member states to implement that and work together is even trickier.”  When the Commission suggested banning sales of new combustion-engine cars after 2035 — deciding to bet on electric vehicles for the future — a massive backlash followed.  Carmakers, fuel producers and engine-manufacturing countries successfully lobbied for a loophole for cars running on synthetic fuels, giving combustion technology another lease on life — even though such fuels are expected to be scarce, expensive and inefficient.  Since the 2035 debate, Brussels has faced calls to ensure “technological neutrality” in all its policymaking and let the market alone decide what’s viable.  But industry isn’t a monolith, and the Commission faces competing demands.  Clean technology manufacturers — which Brussels also wants to support with its Clean Industrial Deal — are pressuring the EU not to walk back its ambitions, warning that zig-zagging on already-passed climate legislation risks undermining the political predictability they need.  Or take recycling: The aluminum and steel sectors are asking the EU to restrict exports of scrap metal to ensure a steady supply of recycled material. But Europe’s recycling industry — which derives significant income from exports — warns that this would damage them.  Brussels won’t be able to make everyone happy. But the sooner it makes those decisions, the smoother the transition will be.  “The last thing we want is for a bunch of old manufacturing industries to just milk out their old assets and try to get as much revenue out of them [as possible] and then just close things down,” Vangenechten said. “That way we’re just extending the problem, and in 20 years’ time there will be zero jobs.”  THE FUTURE OF ALUMINUM Back at the Rheinwerk, workforce levels are expected to return soon to 2023 numbers as the company adds more recycling capacity. The factory is unionized and workers’ representatives were involved in Speira’s plan to stop smelting.  While some European smelters are restarting primary production now that power prices have fallen to pre-crisis levels, there is no going back for Speira. The Rheinwerk is already producing as much aluminum from recycled cans as it used to smelt from scratch. Now, instead of power-intensive electrolysis, the Rheinwerk process starts with sorting through a sea of used drink cans.  In the sorting hall, Speira’s employees set up a cabinet of curiosities they find — coins, license plates, a disturbing amount of yellow Minion keychains, decommissioned military munitions — and decorated a wall with a painting of planet Earth, flanked by two cans.  “A colleague asked if he could paint that,” said Marcel Tappert, deputy head of the Rheinwerk’s recycling and casting operations. “The staff here are very much aware that they are part of the circular economy. You see what goes in, and what comes out is a new can from which you’ll drink your beer in the summer.”  After sorting, the cans are shredded, filtered for impurities, softened in huge ovens and sent for remelting. The last two stages run on fossil gas, though Speira has started mixing in oxygen to lower emissions. Eventually, Tappert said, the Rheinwerk furnaces could run on hydrogen. But that depends on sufficient investments in pipelines to transport the clean-burning gas. “If we relied on trucks, we’d have a truck coming in here every five minutes.”  Speira is prepared to achieve climate neutrality across its entire value chain by 2045, but the company can’t go it alone, Backs said. The EU and national governments have to ensure the necessary infrastructure gets built.  If decision-makers in Brussels and EU capitals don’t do their part, there won’t be any companies left to decarbonize, he warned: “Policies that protect only the climate and don’t future-proof the economy are pointless. What’s supposed to become climate-neutral if there is nothing left?” Lucia Mackenzie contributed to this story. 

BRUSSELS — They might not know it yet, but Germans helped put one of the European Union’s oldest and most polarizing debates to bed when they voted this past weekend. At least that’s the hope from the EU’s pro-nuclear countries. That cabal of around a dozen capitals is looking expectantly at Friedrich Merz, the center-right leader who has vowed to ease the taboo on atomic power. Merz is in line to become chancellor after his party won the most votes in Sunday’s election. That could, in turn, ease a perpetual Brussels logjam blocking pro-nuclear policy. Nuclear power, despite being a low-carbon energy source, has never gotten the same preferential EU treatment granted to carbon-free options like wind and solar. And Germany has long led the charge against changing that approach, pointing to problems with safety, fuel disposal, delays and cost overruns.  “What we’re eyeing is the fact that Germany has been now obviously leading the … anti-nuclear group,” said one pro-atomic EU diplomat, granted anonymity to speak freely.  “So without Germany, I think they’re going to lose the wind” in their sails, they added. “It could be the tipping [point] … to stop this ideological dispute.” The other camp, led by France, has fought tooth and nail for greater recognition of nuclear in Brussels. These nuclear advocates argue nuclear is unfairly neglected despite its ability to produce cheap, low-emission electricity just when high energy prices are suffocating EU industries. It’s an urgent debate, with the European Commission set to unveil a plan on Wednesday to help ailing industries, dubbed the Clean Industrial Deal, and a related plan to cut energy prices.  While the nuclear industry has seen fresh political momentum since Russia’s 2022 invasion of Ukraine, it is still in a precarious situation. And Europe’s largest atomic player, French state-owned energy giant EDF, is saddled with debt and has lost several recent bids for building new nuclear projects. “It’s a do-or-die moment,” said Phuc-Vinh Nguyen, the head of the Paris-based Jacques Delors Centre’s Energy Institute and a nuclear specialist.  How nuclear power is treated in the EU’s economic and energy plans this week will “pretty much decide on the upcoming 10 to 15 years for the industry,” he added. CHAIN REACTION  That’s why pro-nuclear countries are watching the results of Sunday’s election closely. So far, Merz has taken a markedly different approach to his conservative predecessor, Angela Merkel, who agreed to shut down the country’s reactors following protests after the 2011 Japanese Fukushima nuclear accident.  Berlin finalized that phaseout at the height of the EU’s 2022 energy crisis — an outcome the center-right leader has called a “grave strategic mistake.”  Although he has since rowed back promises to restart those reactors, Merz said Germany should collaborate with France on producing advanced small-scale reactors, called SMRs. His party’s manifesto also promises to push for more research into the emerging technology. In Brussels, even a slightly gentler German stance would be felt strongly. “For us it’d definitely be a good signal,” said a second EU diplomat. “Each time a proposal comes up and we have to argue … it’s such a waste of time.” Even nuclear skeptics in private acknowledge a change in power could help relieve tensions. “I would expect nuclear debate to be less divisive,” said a third EU diplomat. “If … there would be less frontal opposition, it would appease the discussion.” Germany taking a softer approach would allow nuclear proponents to more easily steamroll less-influential atomic opponents like Austria and Luxembourg, according to two EU diplomats. In practice, that will give the grouping more power to cement a role for nuclear energy in a raft of upcoming legislation, the diplomats said. That includes Brussels’ climate target for 2040, a legal definition for “low-carbon” hydrogen and new funds tied to EU competitiveness. The industry also hopes it will put pressure on the European Commission to more fully include nuclear in its Clean Industrial Deal and accompanying plan to slash energy prices, according to Yves Desbazeille, director general of the Nucleareurope lobbying group.  That would help pro-nuclear countries reach their goal of increasing installed nuclear capacity 50 percent by 2050 — a target experts warn is nonetheless unrealistic. So far, drafts of those texts obtained by POLITICO show atomic energy has been excluded from updated rules to free up more state aid and numerous other initiatives like EU-backed industrial power contracts. The omission sparked outrage from pro-nuclear countries and industry. “We consider that the text can be improved, to say the least,” Desbazeille said.  This story has been updated.

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.