The main goal is to deter foreign powers from bullying the EU or its member states. Restrictions to trade, direct investment and access to the EU procurement market are among possible countermeasures. This new tool should serve as a shield protecting EU’s sovereignty.

The new trade instrument is primarily meant as a deterrent, but it will allow the EU to fight economic coercion and respond with its own countermeasures.

With 578 votes to 24 and 19 abstentions. Parliament approved on Tuesday a new trade instrument to enable the EU to respond, in line with international law and as a last resort, should the EU or member states face economic blackmail from a foreign country seeking to influence a specific policy or stance.
The Anti-Coercion Instrument (ACI) seeks to protect EU and member state sovereignty in a geopolitical context where trade and investment are increasingly weaponised by foreign powers.
What is coercion?
According to the regulation, economic coercion occurs when a non-EU country attempts to pressure the EU or a member state into making a specific choice by applying, or threatening to apply, trade or investment measures. Although this kind of coercion undermines the EU’s strategic autonomy, it is not covered by the World Trade Organisation (WTO) agreement. The WTO dispute settlement mechanism is unavailable for cases of economic coercion specifically, unless they also involve aspects that violate WTO rules.
Under the new rules, the Commission will have four months to investigate potential coercion. Based on its findings, the Council will have eight to ten weeks to decide -by a qualified majority- whether coercion exists. Although the primary objective will be to engage in dialogue to persuade the authorities of the non-EU country to cease their coercion, if those efforts fail, the EU will have a wide range of countermeasures at its disposal. If coercion is found, and member states agree, the Commission will have six months to outline the appropriate response, keeping the Parliament and the Council informed at all stages.
Potential countermeasures
MEPs enhanced the deterrent aspect of the instrument by including a comprehensive list of potential responses available to the EU, including restrictions in trade of goods and services, intellectual property rights and foreign direct investment. Imposing constraints on access to the EU public procurement market, capital market, and authorisation of products under chemical and sanitary rules will also be possible.
Repairing the injury
Under the new rules, the EU could seek “reparation” from the coercive non-EU country. The Commission may also apply measures to enforce these reparations.
Quote
Bernd LANGE (S&D, DE), rapporteur and Chair of the Committee on International Trade, said: “This instrument enables rapid reaction against coercive measures, against pressure from other countries. We have introduced clear timelines and clear definitions to say what a coercive measure is and how to react to it. We now have a broad range of countermeasures at our disposal and have filled our toolbox with defensive instruments. While this anti-coercion tool should act as a deterrent, we will also be able to take action if necessary to defend the European Union’s sovereignty.”
Next steps
Once formally adopted by the Council – expected in October -, the regulation will take effect 20 days after publication in the Official Journal.
Background
The Commission proposed the mechanism in December 2021, driven by a demand from the European Parliament and in response to economic pressure exerted by the US during the Trump administration, along with numerous confrontations between the EU and China. This new instrument complements a series of trade defence tools adopted in recent years. In May, G7 leaders announced the launch of a coordination platform against economic coercion, echoing the EU’s initiative.
 

Compliments of the European Parliament.

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Blog post by Myriam Moufakkir, Chief Services Officer |  The recent rise of artificial intelligence (AI) has led to a number of quite useful applications, such as helping doctors diagnose diseases and scientists crunch large sets of numbers. So, how does the ECB use this rapidly developing technology? As part of our core work we analyse vast amounts of data. This is the basis for good decisions that contribute to keeping prices stable in the euro area and ensure the safety and soundness of the European banking system. AI offers new ways for us to collect, clean, analyze and interpret this wealth of available data, so that the insights can feed into the work of areas like statistics, risk management, banking supervision and monetary policy analysis.
We are exploring the opportunities and challenges of AI together with other central banks in the European System of Central Banks (ESCB) and the national competent authorities in the Single Supervisory Mechanism, as well as through initiatives such as the Bank for International Settlements’ Innovation Hub. Here are a few examples of what we are doing.
What kinds of AI does the ECB use?
The first initiative concerns the data we use. Our statisticians collect, prepare and disseminate data from over ten million legal entities in Europe, which are classified by institutional sector (e.g. financial institutions, non-financial corporations or the public sector). We need these classifications to have the right data to support our decision-making. Doing this manually, however, is very time-consuming. Machine learning techniques allow us to automate the classification process, meaning that our staff can focus on assessing and interpreting these data.
The second initiative aims to deepen our understanding of price-setting behaviour and inflation dynamics in the EU. Today, by applying web scraping and machine learning, we are able to assemble a huge amount of real-time data on individual product prices. One of the challenges, however, is that the data collected are largely unstructured and not directly suitable for calculating inflation. Together with economists and researchers at the other euro area central banks – via the Price-setting Microdata Analysis network ­– we are therefore exploring how AI can help us structure these data to improve the accuracy of our analyses.
The third initiative is in the area of banking supervision. To do their job, our supervisors analyze a broad range of relevant text documents (e.g. news articles, supervisory assessments and banks’ own documents). To consolidate all of this information in one place, our colleagues have created the Athena platform which helps supervisors find, extract and compare this information. Using natural language processing models trained with supervisory feedback, the platform supports supervisors with topic classification, sentiment analysis, dynamic topic modelling and entity recognition. Supervisors can now collate these kinds of enriched texts within seconds, so they can more quickly understand the relevant information – instead of spending time searching for it.
What else do we have to keep in mind?
Large-language models (of which ChatGPT is the best known) are another area which we are exploring. And we have identified a few possible uses for them. They could be used to write initial drafts of code for experts for use in analysis, or to test software more quickly and thoroughly. These models can also analyze, summarize and compare the documents prepared by the banks we supervise. This supports the work of our supervisory teams. The technology is also capable of helping to more quickly prepare summaries and draft briefings, which can assist colleagues across the bank in policy and decision-making activities. A large language model can also help improve texts being written by staff members, making the ECB’s communication easier to understand for the public. Relatedly, we have used neural network machine translations for a while now to help us communicate with European citizens in their mother tongues.
Naturally, we are cautious about the use of AI and conscious of the risks it entails. We have to ask ourselves questions like “how can we harness the potential that large language models offer in a safe and responsible manner?”, and “how can we ensure proper data management?”. Working in close cooperation with other ESCB institutions, we are looking at key questions in the fields of data privacy, legal constraints and ethical considerations (such as fairness, transparency and accountability).
With those considerations in mind, we will continue to investigate the possibilities and challenges of using AI. The examples above are only the tip of the iceberg. By putting in place the appropriate governance, coordination, infrastructure and investment, we will pull together the various strands of our work on AI and accelerate its adoption across our organization. This will allow us to harness the technology’s full potential and allow us to remain a modern and innovative central bank: an ECB that embraces – and continues to embrace – the future.
 
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Narrowing the gap between the share of men and women who work is one of the very important reforms policymakers can make to revive economies amid the weakest medium-term growth outlook in more than three decades.
With global growth predicted to languish at just 3 percent over the next five years and with traditional growth engines sputtering, many economies are missing out by not tapping women’s potential. Only 47 percent of women are active in today’s labor markets, compared with 72 percent of men. The average global gap has fallen by only 1 percentage point annually over the past three decades and remains unacceptably wide.
To blame are unfair laws, unequal access to services, discriminatory attitudes and other barriers that prevent women from realizing their full economic potential. The result is a shocking waste of talent, leading to losses in potential growth.
We estimate that emerging and developing economies could boost gross domestic product by about 8 percent over the next few years by raising the rate of female labor force participation by 5.9 percentage points—the average amount by which the top 5 percent of countries reduced the participation gap during 2014-19. As the Chart of the Week shows, that’s more than the economic “scarring,” or output losses, inflicted on countries by the pandemic.

Policymakers can of course lift growth in many ways, from governance reforms to strengthen institutions, to financial reforms to unlock capital for investment, as discussed in a recent IMF blog. Complementing these reforms with measures to narrow gender gaps would greatly amplify these returns.
Unfortunately, present policies do not come close to closing gender gaps. Many researchers say it’s inevitable that women’s labor force participation will eventually reach that of men, even if it takes centuries. But gender gaps are unlikely to ever close if present policy trends persist, as we show in a new research paper.
Our analysis of three decades of data shows that countries have made progress increasing women’s participation, but economies of all income levels experienced several setbacks—a result of shocks, crises and policy reversals. The pandemic, for example, eroded progress closing gender gaps, especially for women with young children. Setbacks like this cause scarring that slows and often reverses progress toward gender equality.
As a result, gender gaps in labor force participation will narrow but never close if countries continue on their present policy path. Gaps would remain large for most countries, exceeding 16 percentage points in one out of ten countries.
Countries must step up efforts to break down barriers to women’s participation in the labor market—such as limited access to education, health, assets, finance, land, legal rights, and care services. They should systematically take account of how macroeconomic, structural, and financial policy packages impact women. The IMF’s gender strategy aims to assist member countries in these efforts.
 
For more information, please contact:
Antoinette M. Sayeh, Deputy Managing Director, IMF
Alejandro Badel, Senior Economist – Strategy Policy and Review Department’s Inclusion and Gender, IMF
Rishi Goyal, Deputy Director – Strategy, Policy, and Review Department, IMF
 
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Today, the Commission takes another major step to protect the environment by adopting measures that restrict microplastics intentionally added to products under the EU chemical legislation REACH. The new rules will prevent the release to the environment of about half a million tonnes of microplastics. They will prohibit the sale of microplastics as such, and of products to which microplastics have been added on purpose and that release those microplastics when used. When duly justified, derogations and transition periods for the affected parties to adjust to the new rules apply.
The adopted restriction uses a broad definition of microplastics – it covers all synthetic polymer particles below five millimetres that are organic, insoluble and resist degradation. The purpose is to reduce emissions of intentional microplastics from as many products as possible. Some examples of common products in the scope of the restriction are:

The granular infill material used on artificial sport surfaces – the largest source of intentional microplastics in the environment;
Cosmetics, where microplastics is used for multiple purposes, such as exfoliation (microbeads) or obtaining a specific texture, fragrance or colour;
Detergents, fabric softeners, glitter, fertilisers, plant protection products, toys, medicines and medical devices, just to name a few.

Products used at industrial sites or not releasing microplastics during use are derogated from the sale ban, but their manufacturers will have to provide instructions on how to use and dispose of the product to prevent microplastics emissions.
Next Steps
The first measures, for example the ban on loose glitter and microbeads, will start applying when the restriction enters into force in 20 days. In other cases, the sales ban will apply after a longer period to give affected stakeholders the time to develop and switch to alternatives.
Background
The Commission is committed to fighting microplastics pollution, as stated in the European Green Deal and the new Circular Economy Action Plan. In the Zero Pollution Action Plan, the Commission set the target to reduce microplastics pollution by 30% by 2030.
As part of these efforts, the Commission is working to reduce microplastics pollution from different sources: plastic waste and litter, accidental and unintentional releases (e.g. plastic pellet loss, tyres degradation or release from clothing), as well as intentional uses in products.
To tackle microplastics pollution while preventing the risk of fragmentation in the single market, the Commission requested the European Chemicals Agency (ECHA) to assess the risk posed by microplastics intentionally added to products and whether further regulatory action at EU level was needed. ECHA concluded that microplastics intentionally added to certain products are released into the environment in an uncontrolled manner, and recommended to restrict them.
Based on the scientific evidence provided by ECHA, the Commission drafted a restriction proposal under REACH that was positively voted by the EU countries and successfully passed the scrutiny of the European Parliament and the Council before being adopted.
 
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On September 21, the European Chips Act entered into force. It puts in place a comprehensive set of measures to ensure the EU’s security of supply, resilience and technological leadership in semiconductor technologies and applications.
Semiconductors are the essential building blocks of digital and digitised products. From smartphones and cars, through critical applications and infrastructures for healthcare, energy, defence, communications and industrial automation, semiconductors are central to the modern digital economy. They are also at the centre of strong geostrategic interests and the global technological race.
Concretely the European Chips Act will strengthen manufacturing activities in the Union, stimulate the European design ecosystem, and support scale-up and innovation across the whole value chain. Through the European Chips Act, the European Union aims to reach its target to double its current global market share to 20% in 2030.
Three Pillars of the European Chips Act
The European Chips Act consists of three main pillars.
The first pillar – the Chips for Europe Initiative – reinforces Europe’s technological leadership, by facilitating the transfer of knowledge from the lab to the fab, bridging the gap between research and innovation and industrial activities and by promoting the industrialisation of innovative technologies by European businesses. The Chips for Europe Initiative will be primarily implemented by the Chips Joint Undertaking.
The Initiative will be supported by €3.3 billion of EU funds, which is expected to be matched by funds from Member States. Concretely, this investment will support activities such as the setting up of advanced pilot production lines to accelerate innovation and technology development, the development of a cloud-based design platform, the establishment of competence centres, the development of quantum chips, as well as the creation of a Chips Fund to facilitate access to debt financing and equity.
The second pillar of the European Chips Act incentivises public and private investments in manufacturing facilities for chipmakers and their suppliers.
The second pillar creates a framework to ensure security of supply by attracting investments and enhancing production capacities in semiconductor manufacturing. To this end, it sets out a framework for Integrated Production Facilities and Open EU Foundries that are “first-of-a-kind” in the Union and contribute to the security of supply and to a resilient ecosystem in the Union interest. The Commission has already indicated at the time of the Chips Act proposal that State aid may be granted to first-of-a-kind facilities, in accordance with the Treaty on the functioning of the European Union.
In its third pillar, the European Chips Act has established a coordination mechanism between the Member States and the Commission for strengthening collaboration with and across Member States, monitoring the supply of semiconductors, estimating demand, anticipating shortages, and, if necessary, triggering the activation of a crisis stage. As a first step, a semiconductor alert system has been set up on 18 April 2023. It allows any stakeholder to report semiconductor supply chain disruptions.
Next Steps
Also today, the Regulation on the Chips Joint Undertaking (JU) enters into force, allowing the start of the implementation of the main part of the Chips for Europe Initiative. Furthermore, the Chips Fund will start its activities as well. With the entry into force of the Chips Act, the work of the newly established European Semiconductor Board will also formally start, which will be the key platform for coordination between the Commission, Member States, and stakeholders.
Under the second pillar, industry will be able to apply for planned “first-of-a-kind” facilities to obtain the status of “integrated production facility” (IPF) or “open EU foundry” (OEF). This status will allow these facilities to be established and operable within the Union, thus allowing for a streamlined approach to administrative applications and permit grants. This status will also require that these facilities comply with criteria to ensure their contribution to the EU’s objectives and their reliability as suppliers of chips in times of crisis.
Background
A common European strategy for the semiconductor sector was first announced by Commission President Ursula von der Leyen in her 2021 State of the Union speech. In February 2022, together with the European Chips Act, the Commission published a targeted stakeholder survey in order to gather detailed information on chip and wafer demand, to better understand how the shortage of chips was affecting European industry. In February 2022 the Commission proposed the European Chips Act. In April 2023 a political agreement was reached between the European Parliament and the EU Member States on the Chips Act. The measures adopted will help Europe to reach its 2030 Digital Decade targets, fostering a greener, more inclusive and digital Europe.
For more background information, please click here.
 
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The near-term global outlook is shaped by the increasingly visible impact of monetary policy tightening by most major central banks and stresses in the Chinese economy. Global growth is projected to slow, remaining below trend in 2023-24, while inflation moderates but remains above target. Key downside risks include the possibility of a sharper-than-expected slowdown in China and a continued rise in oil prices.
Summary:

After a stronger-than-expected start to 2023, helped by lower energy prices and the reopening of China, global growth is expected to moderate. The impact of tighter monetary policy is becoming increasingly visible, business and consumer confidence have turned down, and the rebound in China has faded.
Global GDP growth is projected to remain sub-par in 2023 and 2024, at 3% and 2.7% respectively, held back by the macroeconomic policy tightening needed to rein in inflation.
Annual GDP growth in the United States is expected to slow from 2.2% this year to 1.3% in 2024, as tighter financial conditions moderate demand pressures. In the euro area, where demand is already subdued, GDP growth is projected to ease to 0.6% in 2023, and edge up to 1.1% in 2024 as the adverse impact of high inflation on real incomes fades. Growth in China is expected to be held back by subdued domestic demand and structural stresses in property markets, easing to 5.1% in 2023 and 4.6% in 2024.
Headline inflation is declining, but core inflation remains persistent in many economies, held up by cost pressures and high margins in some sectors.
Inflation is projected to moderate gradually over 2023 and 2024, but to remain above central bank objectives in most economies. Headline inflation in the G20 economies is projected to ease to 6% in 2023 and 4.8% in 2024, with core inflation in the G20 advanced economies declining from 4.3% this year to 2.8% in 2024.
Risks remain tilted to the downside. Uncertainty about the strength and speed of monetary policy transmission and the persistence of inflation are key concerns. The adverse effects of higher interest rates could prove stronger than expected, and greater inflation persistence would require additional policy tightening that might expose financial vulnerabilities.
A sharper-than-expected slowdown in China is an additional key risk that would hit output growth around the world.
Monetary policy needs to remain restrictive until there are clear signs that underlying inflation pressures have durably abated. Policy interest rates appear to be at or close to a peak in most economies, including the United States and the euro area, with policy judgements more finely balanced as the effects of higher interest rates become visible.
Governments are faced with mounting fiscal pressures from rising debt burdens and additional spending on ageing populations, the climate transition and defence. Enhanced near-term efforts to rebuild fiscal space and credible medium-term fiscal plans are needed to better align near-term macroeconomic policies and help ensure debt sustainability.
Structural policy efforts need to be reinvigorated to strengthen growth prospects. Reducing barriers in labour and product markets and enhancing skills development would help to boost investment, productivity and labour force participation, and make growth more inclusive.
A key priority is to revive global trade, which is an important source of long-term prosperity for both advanced and emerging-market economies. Concerns about economic security should not prevent advantage being taken of opportunities to lower trade barriers, especially in service sectors.
Enhanced international co-operation is needed to ensure better coordination and faster progress in carbon mitigation efforts.

To read the full report, please click here.

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INTRODUCTION – DELIVER TODAY, PREPARE FOR TOMORROW
Honourable Members,
In just under 300 days, Europeans will take to the polls in our unique and remarkable democracy.
As with any election, it will be a time for people to reflect on the State of our Union and the work done by those that represent them. But it will also be a time to decide on what kind of future and what kind of Europe they want. Among them will be millions of first-time voters, the youngest of whom were born in 2008. As they stand in that polling booth, they will think about what matters to them. They will think about the war that rages at our borders. Or the impact of destructive climate change. About how artificial intelligence will influence their lives. Or of their chances of getting a house or a job in the years ahead.
Our Union today reflects the vision of those who dreamt of a better future after World War II. 
A future in which a Union of nations, democracies and people would work together to share peace and prosperity. They believed that Europe was the answer to the call of history. When I speak to the new generation of young people, I see that same vision for a better future. That same burning desire to build something better. That same belief that in a world of uncertainty, Europe once again must answer the call of history.
And that is what we must do together.
Honourable Members, This starts with earning the trust of Europeans to deal with their aspirations and anxieties. And in the next 300 days we must finish the job that they entrusted us with. I want to thank this House for its leading role in delivering on one of the most ambitious transformations this Union has ever embarked on. When I stood in front of you in 2019 with my programme for a green, digital and geopolitical Europe I know that some had doubts. And that was before the world turned upside down with a global pandemic and a brutal war on European soil.
But look at where Europe is today.
We have seen the birth of a geopolitical Union – supporting Ukraine, standing up to Russia’s aggression, responding to an assertive China and investing in partnerships. We now have a European Green Deal as the centrepiece of our economy and unmatched in ambition. We have set the path for the digital transition and become global pioneers in online rights. We have the historic NextGenerationEU – combining 800 billion euros of investment and reform – and creating decent jobs for today and tomorrow.  We have set the building blocks for a Health Union, helping to vaccinate an entire continent – and large parts of the world.
We have started making ourselves more independent in critical sectors, like energy, chips or raw materials.
I would also like to thank you for the ground-breaking and pioneering work we did on gender equality. As a woman, this means a lot to me. We have concluded files that many thought would be blocked forever, like the Women on Boards Directive and the historic accession of the EU to the Istanbul Convention. With the Directive on pay transparency we have cast into law the basic principle that equal work deserves equal pay. There is not a single argument why – for the same type of work – a woman should be paid less than a man.
But our work is far from over and we must continue pushing for progress together. I know this house supports our proposal on combating violence against women. Here too, I would like that we cast into law another basic principle: No, means no. There can be no true equality without freedom from violence.
And thanks to this Parliament, to Member States and to my team of Commissioners, we have delivered over 90% of the Political Guidelines I presented in 2019.
Together, we have shown that when Europe is bold, it gets things done. And our work is far from over – so let’s stand together. Let’s deliver today and prepare for tomorrow.
EUROPEAN GREEN DEAL
Honourable Members,
Four years ago, the European Green Deal was our answer to the call of history. And this summer – the hottest ever on record in Europe – was a stark reminder of that. Greece and Spain were struck by ravaging wildfires – and were hit again only a few weeks later by devastating floods. And we saw the chaos and carnage of extreme weather – from Slovenia to Bulgaria and right across our Union.
This is the reality of a boiling planet.
The European Green Deal was born out of this necessity to protect our planet. But it was also designed as an opportunity to preserve our future prosperity. We started this mandate by setting a long-term perspective with the climate law and the 2050 target. We shifted the climate agenda to being an economic one.
This has given a clear sense of direction for investment and innovation. And we have already seen this growth strategy delivering in the short-term. Europe’s industry is showing every day that it is ready to power this transition. Proving that modernisation and decarbonisation can go hand in hand.
In the last five years, the number of clean steel factories in the EU has grown from zero to 38. We are now attracting more investment in clean hydrogen than the US and China combined.
And tomorrow I will be in Denmark with Prime Minister Mette Frederiksen to see that innovation first hand. We will mark the launch of the first container ship, powered by clean methanol made with solar energy.
This is the strength of Europe’s response to climate change.
The European Green Deal provides the necessary frame, incentives, and investment – but it is the people, the inventors, the engineers who develop the solutions.
And this is why, Honourable Members, as we enter the next phase of the European Green Deal, one thing will never change. We will keep supporting European industry throughout this transition.  We started with a package of measures – from the Net-Zero Industry Act to the Critical Raw Materials Act.
With our Industry Strategy, we are looking at the risks and needs of each ecosystem in this transition. We need to finish this work. And with this, we need to develop an approach for each industrial ecosystem. Therefore, starting from this month, we will hold a series of Clean Transition Dialogues with industry. The core aim will be to support every sector in building its business model for the decarbonisation of industry.
Because we believe that this transition is essential for our future competitiveness in Europe.
But this is just as much about the people and their jobs of today. Our wind industry, for instance, is a European success story. But it is currently facing a unique mix of challenges. This is why we will put forward a European Wind Power package – working closely with industry and Member States.
We will fast-track permitting even more.
We will improve the auction systems across the EU. We will focus on skills, access to finance and stable supply chains. But this is broader than one sector: From wind to steel, from batteries to electric vehicles, our ambition is crystal clear: The future of our clean tech industry has to be made in Europe.
Honourable Members,
This shows that when it comes to the European Green Deal:
We stay the course. We stay ambitious. We stick to our growth strategy. And we will always strive for a fair and just transition!
That means a fair outcome for future generations – to live on healthy planet. And a fair journey for all those impacted – with decent jobs and a solemn promise to leave no one behind. Just think about manufacturing jobs and competitiveness: a topic we are discussing a lot these days.
Our industry and tech companies like competition. They know that global competition is good for business. And that it creates and protects good jobs here in Europe. But competition is only true as long as it is fair. Too often, our companies are excluded from foreign markets or are victims of predatory practices. They are often undercut by competitors benefitting from huge state subsidies.
We have not forgotten how China’s unfair trade practices affected our solar industry. Many young businesses were pushed out by heavily subsidised Chinese competitors.
Pioneering companies had to file for bankruptcy. Promising talents went searching for fortune abroad. This is why fairness in the global economy is so important – because it affects lives and livelihoods. Entire industries and communities depend on it.
So, we have be to be clear-eyed about the risks we face. Take the electric vehicles sector. It is a crucial industry for the clean economy, with a huge potential for Europe. But global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies. This is distorting our market. And as we do not accept this from the inside, we do not accept this from the outside.
So I can announce today that the Commission is launching an anti-subsidy investigation into electric vehicles coming from China. Europe is open for competition. Not for a race to the bottom. We must defend ourselves against unfair practices.
But equally, it is vital to keep open lines of communication and dialogue with China. Because there also are topics, where we can and have to cooperate. De-risk, not decouple – this will be my approach with the Chinese leadership at the EU-China Summit later this year.
Honourable Members,
In the European Union, we are proud of our cultural diversity. We are a ‘Europe of the Regions’ with a unique blend of languages, music, art, traditions, crafts and cuisines. We are also a continent of unique biological diversity. Some 6 500 species are found only in Europe. In northern Europe, we find the Wadden Sea, a world natural heritage site and unique habitat offering a home to rare species of flora and fauna and a vital resource for millions of migratory birds. And with the Baltic Sea we have the largest area of brackish sea in the world. South of that is the European Plain, characterised by vast tracts of moorland and wetland.
These regions are important allies against ongoing climate change. Protected moors and wetlands absorb enormous volumes of greenhouse gases, secure regional water cycles and are home to unique biodiversity.
And Europe is a continent of forests.
From the mighty coniferous forests of the North and East, via the last remnants of virgin oak and beech forest in central Europe to the cork oak forests of southern Europe: all these forests are an irreplaceable source of goods and services. They absorb carbon dioxide, supply wood and other products, generate fertile soils, and filter the air and the water. Biodiversity and ecosystem services are vital for all of us in Europe.
Loss of nature destroys not only the foundations of our life, but also our feeling of what constitutes home. We must protect it. At the same time, food security, in harmony with nature, remains an essential task.
I would like to take this opportunity to express my appreciation to our farmers, to thank them for providing us with food day after day. For us in Europe, this task of agriculture – producing healthy food – is the foundation of our agricultural policy. And self-sufficiency in food is also important for us.
That is what our farmers provide. It is not always an easy task, as the consequences of Russia’s aggression against Ukraine, climate change bringing droughts, forest fires and flooding, and new obligations are all having a growing impact on farmers’ work and incomes.
We must bear that in mind. Many are already working towards a more sustainable form of agriculture. We must work together with the men and women in farming to tackle these new challenges. That is the only way to secure the supply of food for the future.
We need more dialogue and less polarisation. That is why we want to launch a strategic dialogue on the future of agriculture in the EU. I am and remain convinced that agriculture and protection of the natural world can go hand in hand. We need both.
ECONOMY, SOCIAL AND COMPETITIVENESS
Honourable Members,
A fair transition for farmers, families and industry. This is the hallmark of this Mandate. And it is all the more important as we face strong economic headwinds. I see three major economic challenges for our industry in the year ahead: labour and skills shortages, inflation, and making business easier for our companies.
The first has to do with our labour market. We have not forgotten the early days of the global pandemic. When everyone predicted a new wave of 1930-style mass unemployment. But we defied this prediction. With SURE – the first-ever European short-time work initiative – we saved 40 million jobs.
This is Europe’s social market economy in action. And we can be proud of it!
We then immediately restarted our economic engine thanks to NextGenerationEU. And today we see the results. Europe is close to full employment. Instead of millions of people looking for jobs, millions of jobs are looking for people. Labour and skills shortages are reaching record levels – both here and across all major economies. 74% of SMEs are saying they are facing skill shortages. In the peak of the tourist season, restaurants and bars in Europe are running reduced hours because they cannot find staff. Hospitals are postponing treatment because of lack of nurses. And two thirds of European companies that are looking for IT specialists cannot find them. At the same time millions of parents – mostly mothers – are struggling to reconcile work and family, because there is no childcare. And 8 million young people are neither in employment, education or training.
Their dreams put on hold, their lives on stand-by. This is not only the cause of so much personal distress. It is also one of the most significant bottlenecks for our competitiveness. Because labour shortages hamper the capacity for innovation, growth and prosperity. So we need to improve access to the labour market.
Most importantly for young people, for women. And we need qualified migration. In addition, we need to respond to the deep-rooted shifts in technology, society and demography. And for that, we should rely on the expertise of businesses and trade unions, our collective bargaining partners. It is almost forty years since Jacques Delors convened the Val Duchesse meeting that saw the birth of European social dialogue.
Since then, social partners have shaped the Union of today – ensuring progress and prosperity for millions. And as the world around us changes faster than ever, social partners must again be at the heart of our future. Together we must focus on the challenges facing the labour market – from skills and labour shortages, to new challenges stemming from AI.
This is why together with the Belgian Presidency next year, we will convene a new Social Partner Summit once again at Val Duchesse. The future of Europe will be built with and by our social partners.
 
The second major economic challenge: persistent high inflation. Christine Lagarde and the European Central Bank are working hard to keep inflation under control. We know that returning to the ECB’s medium-term target will take some time. The good news is that Europe has started bringing energy prices down. We have not forgotten, Putin’s deliberate use of gas as a weapon and how it triggered fears of blackout and an energy crisis like in the 70s. Many thought, we would not have enough energy to get through the winter. But we made it.
Because we stayed united – pooling our demand and buying energy together. And at the same time, different to the 70s, we used the crisis to massively invest in renewables and fast-track the clean transition. We used Europe’s critical mass to bring prices down and secure our supply. The price for gas in Europe was over 300 euros per MWh one year ago. It is now around 35. So we need to look at how we can replicate this model of success in other fields like critical raw materials or clean hydrogen.
The third challenge for European companies is about making it easier to do business. Small companies do not have the capacity to cope with complex administration. Or they are held back by lengthy processes. This often means they do less with the time they have – and that they miss out on opportunities to grow. This is why – before the end of the year – we will appoint an EU SME envoy reporting directly to me. We want to hear directly from small and medium sized businesses, about their everyday challenges.
For every new piece of legislation we conduct a competitiveness check by an independent board. And next month, we will make the first legislative proposals towards reducing reporting obligations at the European level by 25%.
Honourable Members,
Let’s be frank – this will not be easy. And we will need your support. Because this is a common endeavour for all European institutions. So we also have to work with Member States, to match the 25% at national level. It is time to make business easier in Europe!
But European companies also need access to key technologies to innovate, develop and manufacture. This is a question of European sovereignty as the Leaders underlined in Versailles. It is an economic and national security imperative to preserve a European edge on critical and emerging technologies. This European industrial policy also requires common European funding. This is why – as part of our proposal for a review of our budget – we proposed the STEP platform.
With STEP we can boost, leverage and steer EU funds to invest in everything from microelectronics to quantum computing and AI. From biotech to clean tech. Our companies need this support now – so I urge for a quick agreement on our budget proposal. And I know I can count on this House. And there is more when it comes to competitiveness.
We have seen real bottlenecks along global supply chains, including because of the deliberate policies of other countries. Just think about China’s export restrictions on gallium and germanium – which are essential for goods like semiconductors and solar panels. This shows why it is so important for Europe to step up on economic security.
By de-risking and not decoupling. And I am very proud that this concept has found broad support from key partners. From Australia to Japan and the United States. And many other countries around the world want to work together. Many are overly dependent on a single supplier for critical minerals. Others – from Latin America to Africa – want to develop local industries for processing and refining, instead of just shipping their resources abroad.
This is why later this year we will convene the first meeting of our new Critical Raw Materials Club. At the same time, we will continue to drive open and fair trade. So far, we have concluded new free trade agreements with Chile, New Zealand and Kenya. We should aim to complete deals with Australia, Mexico and Mercosur by the end of this year. And soon thereafter with India and Indonesia. Smart trade delivers good jobs and prosperity.
Honourable Members,
These three challenges – labour, inflation and business environment – come at a time when we are also asking industry to lead on the clean transition. So we need to look further ahead and set out how we remain competitive as we do that. This is why I have asked Mario Draghi – one of Europe’s great economic minds – to prepare a report on the future of European competitiveness.  Because Europe will do “whatever it takes” to keep its competitive edge.
DIGITAL & AI
Honourable Members,
When it comes to making business and life easier, we have seen how important digital technology is. It is telling that we have far overshot the 20% investment target in digital projects of NextGenerationEU. Member States have used that investment to digitise their healthcare, justice system or transport network. At the same time, Europe has led on managing the risks of the digital world. 
The internet was born as an instrument for sharing knowledge, opening minds and connecting people.  But it has also given rise to serious challenges. Disinformation, spread of harmful content, risks to the privacy of our data. All of this led to a lack of trust and a breach of fundamental rights of people. In response, Europe has become the global pioneer of citizen’s rights in the digital world. The DSA and DMA are creating a safer digital space where fundamental rights are protected. And they are ensuring fairness with clear responsibilities for big tech.
This is a historic achievement – and we should be proud of it. The same should be true for artificial intelligence.  It will improve healthcare, boost productivity, address climate change. But we also should not underestimate the very real threats. Hundreds of leading AI developers, academics and experts warned us recently with the following words:
“Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.”
AI is a general technology that is accessible, powerful and adaptable for a vast range of uses – both civilian and military. And it is moving faster than even its developers anticipated.  So we have a narrowing window of opportunity to guide this technology responsibly.
I believe Europe, together with partners, should lead the way on a new global framework for AI, built on three pillars: guardrails, governance and guiding innovation. Firstly, guardrails. Our number one priority is to ensure AI develops in a human-centric, transparent and responsible way. This is why in my Political Guidelines, I committed to setting out a legislative approach in the first 100 days.
We put forward the AI Act – the world’s first comprehensive pro-innovation AI law. And I want to thank this House and the Council for the tireless work on this groundbreaking law.  Our AI Act is already a blueprint for the whole world. We must now focus on adopting the rules as soon as possible and turn to implementation.
The second pillar is governance.  We are now laying the foundations for a single governance system in Europe. But we should also join forces with our partners to ensure a global approach to understanding the impact of AI in our societies. Think about the invaluable contribution of the IPCC for climate, a global panel that provides the latest science to policymakers. I believe we need a similar body for AI – on the risks and its benefits for humanity.
With scientists, tech companies and independent experts all around the table.  This will allow us to develop a fast and globally coordinated response – building on the work done by the Hiroshima Process and others. The third pillar is guiding innovation in a responsible way. Thanks to our investment in the last years, Europe has now become a leader in supercomputing – with 3 of the 5 most powerful supercomputers in the world. We need to capitalise on this.
This is why I can announce today a new initiative to open up our high-performance computers to AI start-ups to train their models. But this will only be part of our work to guide innovation. We need an open dialogue with those that develop and deploy AI. It happens in the United States, where seven major tech companies have already agreed to voluntary rules around safety, security and trust. 
It happens here, where we will work with AI companies, so that they voluntarily commit to the principles of the AI Act before it comes into force. Now we should bring all of this work together towards minimum global standards for safe and ethical use of AI.
GLOBAL, MIGRATION AND SECURITY
Honourable Members,
When I stood here four years ago, I said that if we are united on the inside, nobody will divide us from the outside. And this was the thinking behind the Geopolitical Commission. Our Team Europe approach has enabled us to be more strategic, more assertive and more united. And that is more important than ever. Our heart bleeds when we see the devastating loss of life in Libya and Morocco after the violent floods and earthquake.
Europe will always stand ready to support in any way we can. Or think about the Sahel region, one of the poorest yet fastest growing demographically. The succession of military coups will make the region more unstable for years ahead. Russia is both influencing and benefiting from the chaos. And the region has become fertile ground for the rise in terrorism.  This is of direct concern for Europe – for our security and prosperity.
So we need to show the same unity of purpose towards Africa as we have shown for Ukraine. We need to focus on cooperation with legitimate governments and regional organisations. And we need to develop a mutually beneficial partnership which focuses on common issues for Europe and Africa. This is why, together with High Representative Borrell, we will work on a new strategic approach to take forward at the next EU-AU Summit.
Honourable Members,
History is on the move. Russia is waging a full-scale war against the founding principles of the UN Charter. This has raised immense concerns in countries from Central Asia to the Indo-Pacific. They are worried that in a lawless world, they might face the same fate as Ukraine. We see a clear attempt by some to return to bloc thinking – trying to isolate and influence countries in between.
And it comes at a time when there is a deeper unease by many emerging economies about the way institutions and globalisation work for them. Those concerns are legitimate. These emerging economies – with their people and natural assets – are essential allies in building a cleaner, safer and more prosperous world. Europe will always work with them to reform and improve the international system. We want to lead efforts to make the rules-based order fairer and make distribution more equal.
This will also mean working with new and old partners to deepen our connections. And Europe’s offer with Global Gateway is truly unique. Global Gateway is more transparent, more sustainable, and more economically attractive. Just last week I was in New Delhi to sign the most ambitious project of our generation.
The India-Middle East-Europe Economic Corridor. It will be the most direct connection to date between India, the Arabian Gulf and Europe: With a rail link, that will make trade between India and Europe 40% faster. With an electricity cable and a clean hydrogen pipeline – to foster clean energy trade between Asia, the Middle East and Europe. With a high-speed data cable, to link some of the most innovative digital ecosystems in the world, and create business opportunities all along the way. These are state-of-the-art connections for the world of tomorrow. Faster, shorter, cleaner.
And Global Gateway is making the real difference.
I have seen it in Latin America, South-East Asia and across Africa – from building a local hydrogen economy with Namibia and Kenya to a digital economy with the Philippines. These are investments in our partners’ economy. And they are investments in Europe’s prosperity and security in a fast-changing world.
Honourable Members,
Every day, we see that conflict, climate change and instability are pushing people to seek refuge elsewhere. I have always had a steadfast conviction that migration needs to be managed. It needs endurance and patient work with key partners. And it needs unity within our Union. This is the spirit of the New Pact on Migration and Asylum. When we took office, there seemed to be no possible compromise in sight.
But with the Pact, we are striking a new balance. Between protecting borders and protecting people. Between sovereignty and solidarity. Between security and humanity. We listened to all Member States and focused on all routes. And we have translated the spirit of the Pact into practical solutions. We were fast and united in responding to the hybrid attack that Belarus launched against us. We worked closely with our Western Balkan partners and reduced irregular flows.
We have signed a partnership with Tunisia that brings mutual benefits beyond migration – from energy and education, to skills and security. And we now want to work on similar agreements with other countries. We stepped up border protection. European Agencies deepened their cooperation with Member States.
Allow me to thank in particular Bulgaria and Romania for leading the way – showcasing best practices on both asylum and returns. They have proved it: Bulgaria and Romania are part of our Schengen area. So let us finally bring them in – without any further delay.
Ladies and Gentlemen,
Our work on migration is based on the conviction that unity is within our reach. An agreement on the pact has never been so close. Parliament and the Council have a historic opportunity to get it over the line. Let us show that Europe can manage migration effectively and with compassion. Let’s get this done!
Honourable members,
We know that migration requires constant work. And nowhere is that more vital than in the fight against human smugglers. They attract desperate people with their lies. And put them on deadly routes across the desert, or on boats that are unfit for the sea. The way these smugglers operate is continuously evolving. But our legislation is over twenty years old and needs an urgent update. So we need new legislation and a new governance structure.
We need stronger law enforcement, prosecution and a more prominent role for our agencies – Europol, Eurojust and Frontex. And we need to work with our partners to tackle this global plague of human trafficking. This is why the Commission will organise an International Conference on fighting people smuggling. It is time to put an end to this callous and criminal business!
UKRAINE
Honourable Members,
On the day when Russian tanks crossed the border into Ukraine, a young Ukrainian mother set off for Prague to bring her child to safety. When the Czech border official stamped her passport, she started crying. Her son didn’t understand. And he asked his mother why she was crying. She answered: “Because we are home.” “But this is not Ukraine,” he argued. So she explained: “This is Europe.”
On that day, that Ukrainian mother, felt that Europe was her home. Because “home is where we trust each other”. And the people of Ukraine could trust their fellow Europeans. Her name was Victoria Amelina. She was one of the great young writers of her generation and a tireless activist for justice. Once her son was safe, Victoria returned to Ukraine to document Russia’s war crimes. One year later she was killed by a Russian ballistic missile, while having dinner with colleagues. The victim of a Russian war crime, one of countless attacks against innocent civilians. Amelina was with three friends that day – including Héctor Abad Faciolince, a fellow writer from Colombia. He is part of a campaign called “Aguanta, Ucrania” – “Resist, Ukraine”, created to tell Latin Americans of Russia’s war of aggression and attacks on civilians. But Héctor could never imagine becoming the target himself. Afterwards, he said he didn’t know why he lived and she died.
But now he is telling the world about Victoria. To save her memory and to end this war. And I am honoured that Héctor is here with us today. And I want you to know that we will keep the memory of Victoria – and all other victims – alive. Aguanta, Ucrania. Slava Ukraini!
Honourable Members,
We will be at Ukraine’s side every step of the way. For as long as it takes. Since the start of the war, four million Ukrainians have found refuge in our Union. And I want to say to them that they are as welcome now as they were in those fateful first weeks. We have ensured that they have access to housing, healthcare, the job market and much more.
Honourable Members,
this was Europe answering the call of history. And so I am proud to announce that the Commission will propose to extend our temporary protection to Ukrainians in the EU. Our support to Ukraine will endure. We have provided 12 billion euros this year alone to help pay wages and pensions. To help keep hospitals, schools and other services running. And through our ASAP proposal we are ramping up ammunition production to help match Ukraine’s immediate needs.
But we are also looking further ahead. This is why we have proposed an additional 50 billion euros over four years for investment and reforms. This will help build Ukraine’s future to rebuild a modern and prosperous country. And that future is clear to see. This House has said it out loud: The future of Ukraine is in our Union. The future of the Western Balkans is in our Union. The future of Moldova is in our Union. And I know just how important the EU perspective is for so many people in Georgia.
Honourable Members,
I started by speaking of Europe responding to the call of history. And history is now calling us to work on completing our Union. In a world where some are trying to pick off countries one by one, we cannot afford to leave our fellow Europeans behind. In a world where size and weight matters, it is clearly in Europe’s strategic and security interests to complete our Union. But beyond the politics and geopolitics of it, we need to picture what is at stake. We need to set out a vision for a successful enlargement.
A Union complete with over 500 million people living in a free, democratic and prosperous Union. A Union complete with young people who can live, study and work in freedom. A Union complete with vibrant democracies in which judiciaries are independent, oppositions are respected, and journalists are protected.
Because the rule of law and fundamental rights will always be the foundation of our Union – in current and in future Member States. This is why the Commission has made the Rule of Law Reports a key priority. We now work closely with Member States to identify progress and concerns – and make recommendations for the year ahead. This has ensured accountability in front of this House and national parliaments. It has allowed for dialogue between Member States. And it is delivering results.
I believe that it can do the same for future Member States. This is why I am very happy to announce that we will open the Rule of Law Reports to those accession countries who get up to speed even faster. This will place them on an equal footing with Member States. And support them in their reform efforts. And it will help ensure that our future is a Union of freedom, rights and values for all.
This is in our shared interest. Think about the great enlargement of 20 years ago. We called it the European Day of Welcomes. And it was a triumph of determination and hope over the burdens of the past. And in the 20 years since we have seen an economic success story which has improved the lives of millions. I want us to look forward to the next European Day of Welcomes and the next economic success stories. We know this is not an easy road.
Accession is merit-based – and the Commission will always defend this principle. It takes hard work and leadership. But there is already a lot of progress. We have seen the great strides Ukraine has already made since we granted them candidate status.  And we have seen the determination of other candidate countries to reform.
Honourable Members,
it is now time for us to match that determination. And that means thinking about how we get ready for a completed Union. We need to move past old, binary debates about enlargement. This is not a question of deepening integration or widening the Union. We can and we must do both. To give us the geopolitical weight and the capacity to act.
This is what our Union has always done. Each wave of enlargement came with a political deepening. We went from coal and steel towards full economic integration. And after the fall of the Iron Curtain, we turned an economic project into a true Union of people and states. I believe that the next enlargement must also be a catalyst for progress. We have started to build a Health Union at 27. And I believe we can finish it at 30+. We have started to build European Defence Union at 27. And I believe we can finish it at 30+.
We have proven that we can be a Geopolitical Union and showed we can move fast when we are united. And I believe that Team Europe also works at 30+.
Honourable Members,
I know this House believes the same. And the European Parliament has always been one of the main drivers of European integration. It has been so throughout the decades. And it is once again today. And I will always support this House – and all of those who want to reform the EU to make it work better for citizens. And, yes, that means including through a European Convention and Treaty change if and where it is needed!
But we cannot – and we should not – wait for Treaty change to move ahead with enlargement. A Union fit for enlargement can be achieved faster. That means answering practical questions about how a Union of over 30 countries will work in practice. And in particular about our capacity to act. The good news is that with every enlargement those who said it would make us less efficient were proven wrong. Take the last few years. We agreed on NextGenerationEU at 27. We agreed to buy vaccines at 27. We agreed on sanctions in record time – also at 27. We agreed to purchase natural gas – not only at 27 but including Ukraine, Moldova and Serbia.
So it can be done. But we need to look closer at each policy and see how they would be affected by a larger Union. This is why the Commission will start working on a series of pre-enlargement policy reviews to see how each area may need to be adapted to a larger Union. We will need to think about how our institutions would work – how the Parliament and the Commission would look.
We need to discuss the future of our budget – in terms of what it finances, how it finances it, and how it is financed. And we need to understand how to ensure credible security commitments in a world where deterrence matters more than ever.  These are questions we must address today if we want to be ready for tomorrow. And the Commission will play its part. This is why we will put forward our ideas to the Leaders’ discussion under the Belgian Presidency.
We will be driven by the belief that completing our Union is the best investment in peace, security and prosperity for our Continent. So it is time for Europe to once again think big and write our own destiny!
CONCLUSION
Honourable Members, Victoria Amelina believed that it is our collective duty to write a new story for Europe. This is where Europe stands today. At a time and place where history is written. The future of our continent depends on the choices we make today. On the steps we take to complete our Union.
The people of Europe want a Union that stands up for them in a time of great power competition. But also one that protects and stands close to them, as a partner and ally in their daily battles. And we will listen to their voice.
If it matters to Europeans, it matters to Europe. Think again about the vision and imagination of the young generation I started my speech with. It is the moment to show them that we can build a continent where you can be who you are, love who you want, and aim as high as you want.
A continent reconciled with nature and leading the way on new technologies.
A continent that is united in freedom and peace.
Once again – this is Europe’s moment to answer the call of history. Long live Europe. 
Presented by Ursula Van der Leyen, President of the European Commission
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Agenda highlights
The high-level week of the 78th session of the UN General Assembly starts on 18 September 2023. The first day of the general debate will be on Tuesday, 19 September.
The President of the European Council, Charles Michel, will address the General Assembly on behalf of the EU and will participate in a series of side events.
EU priorities at the 78th UN General Assembly
Every year, the Council adopts priorities for the UN and the UN General Assembly, which guide the EU’s work for the year to come.
The Council’s priorities for the 78th UN General Assembly (September 2023–September 2024) centre around a commitment to multilateralism and a rules-based international order. Taking into account multiple global crises such as Russia’s illegal war against Ukraine, the situation in the Sahel and the climate emergency, the overarching priorities are:

accelerating implementation of sustainable development goals
strengthening global governance in line with the UN Secretary-General’s proposals on ’Our Common Agenda’
building global partnerships

EU priorities at the 78th United Nations General Assembly: Council approves conclusions (press release, 20 July 2023)

Climate ambition summit
On 20 September, President Michel will attend the climate ambition summit.
World leaders will discuss how to tackle climate change and accelerate the pace and scale of a just transition.

Climate ambition summit, 20 September 2023

Bilateral meetings
In the margins of the UN General Assembly, President Michel will meet with leaders from around the world.
The EU at the UN General Assembly
The EU is committed to multilateralism, with a strong and effective UN at its core. Since 1974, the EU has been a permanent observer at the UN General Assembly.
Following the adoption of a UN General Assembly resolution in May 2011, the EU has had the ability to speak early among other major groups and can be represented by the EU external representatives (the President of the European Council, the EU High Representative for Foreign Affairs and Security Policy, the European Commission and the EU delegation).
Since 2011, the President of the European Council has addressed the General Assembly on behalf of the EU. (EU at the UN General Assembly – background information)
Programme:

17/09/2023 4:00pm

Meeting of the European Union – United Nations – African Union

17/09/2023 5:45pm

EU-UN Principals meeting

19/09/2023 8:00am

Welcome reception hosted by UN Secretary-General António Guterres

19/09/2023 9:00am

Opening of the 78th General Assembly’s General Debate

19/09/2023 3:00pm

High-level event: ‘Towards a fair international financial architecture’

20/09/2023 10:00am

High-level meeting on ‘Pandemic prevention, preparedness & response’

20/09/2023 10:00am

(16:00 CEST) Climate ambition summit

21/09/2023 (Time TBC)

President Charles Michel’s address to the 78th UN General Assembly’s General Debate

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The Platform for Collaboration on Tax (PCT) – a joint initiative of the IMF, OECD, UN and World Bank Group – released a new report on carbon metrics of its partners. The report aims to help policymakers, businesses and other stakeholders strengthen their understanding of different carbon pricing metrics of the four largest international organizations.
Carbon pricing has emerged as the policy strategy to monetize the cost of the emission of carbon dioxide and other greenhouse gases, such as the damage caused by climate change. In the last decade, international organizations have developed diverse metrics on carbon pricing. The PCT’s new report, “Carbon Pricing Metrics: Analyzing Existing Tools and Databases of Platform for Collaboration on Tax (PCT) Partners,” showcases this rich array of approaches of the PCT Partners (the IMF, OECD, UN and the World Bank Group) and provides a comparison of various metrics, including other carbon pricing metrics. The study shows that the existing metrics of the PCT Partners complement each other and give a comprehensive picture of the carbon pricing landscape. According to the report, the PCT Partners concur on a crucial message: Energy prices are poorly aligned with climate, environmental and health costs. Carbon pricing signals to date are insufficient.
This report was prepared under the PCT’s environmental taxation/climate and tax workstream, which brings together experts from the four international organizations. Following the release of the report, the PCT Partners will hold a launch event in September 2023 with expert speakers, who will discuss the key takeaways from the report.
The full report can be reached here.
For questions and comments, please contact the PCT Secretariat at taxcollaborationplatform@worldbank.org 
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European Central Bank | 6 September 2023

Frontloading green investment significantly reduces medium-term costs and risks facing households and firms
Not expediting green transition drags down firms’ profitability and households’ purchasing power while pushing up credit risk for banks
Further delaying transition means missing Paris Agreement goals and exacerbating impact of costly physical risks

The European Central Bank (ECB) today published the results of its second economy-wide climate stress test. The results show that the best way to achieve a net-zero economy for firms, households and banks in the euro area is to accelerate the green transition to a rate that is faster than under current policies.
“We need more decisive policies to ensure a speedier transition towards a net-zero economy in line with the goals of the Paris Agreement. Moving at the current pace will push up risks and costs for the economy and financial system. There is a clear need for speed on the road to Paris,” says ECB Vice-President Luis de Guindos.
The stress test analyses the resilience of firms, households and banks to three transition scenarios, which differ in terms of timing and ambition:

an “accelerated transition”, which frontloads green policies and investment, leading to a reduction in emissions by 2030 in line with the goals of the Paris Agreement;
a “late-push transition”, which continues on the current path, but does not speed up until 2026 (and is still intense enough to achieve Paris-aligned emission reductions by 2030);
a “delayed transition”, which also starts only in 2026, but is not sufficiently ambitious to reach the Paris Agreement goals by 2030.

The results show that firms and households clearly benefit from a faster transition. While a speedier transition initially involves greater investment and higher energy costs, financial risks decrease significantly in the medium term. Both profits and purchasing power are less negatively affected as the frontloaded investment in renewable energy pays off earlier and ultimately reduces energy expenses. In the accelerated transition, green investment by euro area firms rises to €2 trillion by 2025, while amounting to only €0.5 trillion in the other two scenarios. In the late-push transition, green investment catches up with the accelerated transition by 2030, as they both reach a total of €3 trillion, while it remains lower in the delayed transition. For it to catch up, green investment needs to be increased swiftly, putting firms at higher risk, particularly in energy-intensive sectors such as manufacturing, mining and electricity, with debt levels rising and profits falling around twice as much as for the average euro area firm.
If firms are at risk, so are the banks that lend to them. Banks are exposed to the highest credit risk if the transition has to be rushed at a later stage and investment is required quickly at higher costs. In the late-push transition, banks can expect their credit risk to rise by more than 100% by 2030 compared with 2022, while in the accelerated transition, the increase is only 60%.
Moreover, delaying the transition, and not acting at all, leads to even higher costs and risks in the long run. While it entails less investment overall, missing emission reduction targets exacerbates the impact of physical risk on the economy and the financial sector significantly.

Chart 1
More ambitious emission reduction targets driven by timely and intensive investment lead to lower credit risk for banks in the medium term

Source: ECB calculations based on Orbis, Urgentem, Eurostat, Network for Greening the Financial System, Broad Macroeconomic Projection Exercise (BMPE) projections, International Renewable Energy Agency (IRENA, 2021) and Intergovernmental Panel on Climate Change (IPCC, 2022) data.
Notes: Panel a) displays euro area cumulative investment across time, representing the debt acquired by euro area firms in each scenario between 2023 and 2030. Panel b) presents median corporate loan portfolio probabilities of default for significant institutions in the euro area.

The second economy-wide climate stress test follows up on the results of the first economy-wide stress test exercise published in September 2021. It complements the ECB Banking Supervision climate stress test, which analysed risks for individual banks from a bottom-up perspective in July 2022, by having a wider scope and looking at firms, households and the banking sector from a top-down perspective. The ECB’s economy-wide climate stress is part of its climate agenda and ongoing work to improve understanding of climate-related risk.
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