Today, the Commission has proposed detailed rules to define what constitutes renewable hydrogen in the EU, with the adoption of two Delegated Acts required under the Renewable Energy Directive. These Acts are part of a broad EU regulatory framework for hydrogen which includes energy infrastructure investments and state aid rules, and legislative targets for renewable hydrogen for the industry and transport sectors. They will ensure that all renewable fuels of non-biological origin (also known as RFNBOs) are produced from renewable electricity. The two Acts are inter-related and both necessary for the fuels to be counted towards Member States’ renewable energy target. They will provide regulatory certainty to investors as the EU aims to reach 10 million tonnes of domestic renewable hydrogen production and 10 million tonnes of imported renewable hydrogen in line with the REPowerEU Plan.
More renewables, less emissions
The first Delegated Act defines under which conditions hydrogen, hydrogen-based fuels or other energy carriers can be considered as an RFNBO. The Act clarifies the principle of “additionality” for hydrogen set out in the EU’s Renewable Energy Directive. Electrolysers to produce hydrogen will have to be connected to new renewable electricity production. This principle aims to ensure that the generation of renewable hydrogen incentivises an increase in the volume of renewable energy available to the grid compared to what exists already. In this way, hydrogen production will be supporting decarbonisation and complementing electrification efforts, while avoiding pressure on power generation.
While initial electricity demand for hydrogen production will be negligible, it will increase towards 2030 with the mass rollout of large-scale electrolysers. The Commission estimates that around 500 TWh of renewable electricity is needed to meet the 2030 ambition in REPowerEU of producing 10 million tonnes of RFNBOs. The 10Mt ambition in 2030 corresponds to 14% of total EU electricity consumption. This ambition is reflected in the Commission proposal to increase the 2030 target for renewables to 45%.
The Delegated Act sets out different ways in which producers can demonstrate that the renewable electricity used for hydrogen production complies with additionality rules. It further introduces criteria aimed to ensure that renewable hydrogen is only produced when and where sufficient renewable energy is available (known as temporal and geographic correlation).
To take into account existing investment commitments and allow the sector to adapt to the new framework, the rules will be phased in gradually, and designed to become more stringent over time. Specifically, the rules foresee a transition phase of the requirements on “additionality” for hydrogen projects that will start operating before 1 January 2028. This transition period corresponds to the period when electrolysers will be scaled up and come onto the market. Furthermore, hydrogen producers will be able to match their hydrogen production with their contracted renewables on a monthly basis until the 1 January 2030. However, Member States will have the option of introducing stricter rules about temporal correlation as of 1 July 2027.
The requirements for the production of renewable hydrogen will apply to both domestic producers as well as producers from third countries that want to export renewable hydrogen to the EU to count towards the EU renewables targets. A certification scheme relying on voluntary schemes will ensure that producers, whether in the EU or in third countries, can demonstrate in a simple and easy way their compliance with the EU framework and trade renewable hydrogen within the Single Market.
The second Delegated Act provides a methodology for calculating life-cycle greenhouse gas emissions for RFNBOs. The methodology takes into account greenhouse gas emissions across the full lifecycle of the fuels, including upstream emissions, emissions associated with taking electricity from the grid, from processing, and those associated with transporting these fuels to the end-consumer. The methodology also clarifies how to calculate the greenhouse gas emissions of renewable hydrogen or its derivatives in case it is co-produced in a facility that produces fossil-based fuels.
Following today’s adoption, the Acts will now be transmitted to the European Parliament and the Council, which have 2 months to scrutinise them and to either accept or reject the proposals. At their request, the scrutiny period can be extended by 2 months. There is no possibility for the Parliament or Council to amend the proposals.
Background
In 2020, the Commission adopted a Hydrogen Strategy setting out a vision for the creation of a European hydrogen ecosystem from research and innovation to production and infrastructure, and development of international standards and markets. Hydrogen is expected to play a major role in the decarbonisation of industry and heavy-duty transport in Europe and globally. As part of the ‘Fit for 55′ package, the Commission has introduced several incentives for its uptake, including mandatory targets for the industry and transport sectors.
Hydrogen is also a key pillar of the REPowerEU Plan to get rid of Russian fossil fuels. The Commission has outlined a ‘Hydrogen Accelerator’ concept to scale up the deployment of renewable hydrogen. In particular, the REPowerEU Plan aims for the EU to produce 10 million tonnes and import 10 million tonnes of renewable hydrogen by 2030.
On top of the regulatory framework, the Commission is also supporting the emergence of the hydrogen sector in the EU via Important Projects of Common European Interest (IPCEIs). The first IPCEI, called “IPCEI Hy2Tech“, which includes 41 projects and was approved in July 2022, aims at developing innovative technologies for the hydrogen value chain to decarbonise industrial processes and the mobility sector, with a focus on end-users. In September 2022, the Commission approved “IPCEI Hy2Use“, a second project which complements IPCEI Hy2Tech and which will support the construction of hydrogen-related infrastructure and the development of innovative and more sustainable technologies for the integration of hydrogen into the industrial sector.
Compliments of the European Commission.
The post EU Commission sets out rules for renewable hydrogen first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Novel survey shows how concerned people are about climate change, how they view mitigation polices, and what drives support for climate action

People across the world worry about climate change, but that concern alone doesn’t translate into support for climate mitigation policies.
That’s our finding based on a recent survey designed to better illustrate how people perceive the risks from climate change and their support for government climate actions.
Responses also show that those who were more concerned about climate change tend to be female, more educated, followers of news, and more accepting of government’s role in regulating the economy. Data shows that public transport users and those that rely less on cars are also more concerned about climate change.
Our survey of almost 30,000 people in 28 countries was conducted in July and August by market researcher YouGov. The survey covered advanced and emerging economies and included 20 of the top 25 emitters as well as nine of the 25 countries most exposed to climate change.
This novel survey of climate mitigation beliefs offers policymakers a better understanding of how to address the urgent challenge of climate change. While governments have ambitious goals, the world is not yet on track to contain global warming to 1.5 to 2 degrees Celsius. According to scientists, failing to get emissions on the correct course by 2030 may lock global warming above 2 degrees and risk a catastrophic tipping point at which climate change becomes self-perpetuating.
Our survey shows that providing even small amounts of information on policy efficacy and benefits—including co-benefits, such as improved air quality and better health—can engender greater support. This support, however, may be short-lived if policy tradeoffs are not made explicit, highlighting the importance of ensuring the public understands the relative costs and benefits of available policy options.
Some of the most economically efficient policies, such as carbon pricing based on the content of fuels or their emissions, often face political resistance. Importantly, the survey highlights that climate concern alone doesn’t translate into broad support for carbon pricing policies such as carbon taxes or emissions trading systems.
Carbon pricing is more acceptable when presented along with information about the impact of climate change, how pricing works, and options for using the revenue it generates. Notably, people are more supportive of the policy if the revenues it generates are used to shield economically vulnerable groups from the adverse impact of climate policies.
Subsidizing green investments finds large support across all countries, while opponents often cite concerns about corruption and policy ineffectiveness even as proponents can sometimes fail to recognize the costs associated with these policies for the public budget. This suggests that public spending and investment efficiency matters in enhancing support for greening the economy.
Support for multilateral action
The survey points to broader support for collective action and larger common ground for crafting international agreements than expected. A majority of respondents across all countries think that climate change policy will only be effective if most countries adopt measures to reduce carbon emissions.
Moreover, most respondents in both advanced and emerging market economies think that all countries, not only rich ones, should pay to address climate change. In addition, a large share of respondents in most countries say burden sharing should be based on current rather than historical emissions. The public is likely to back costly climate policies if other countries do so, both because this increases the odds of reaching global net-zero emissions goals and because those efforts resonate as fair.
Knowledge of climate mitigation policies remains patchy, and many people still have no opinion when it comes to supporting or opposing climate policy actions in their country. Here’s how governments can better support the urgent need for green transitions:

Educate the public about the causes and consequences of climate change and the costs of inaction
Talk about the costs of inaction, such as pollution, and the benefits of addressing these, like improvements for air quality, health, and protection of low-income households
Emphasize that the policies work, so the trade-offs are worth it
Underscore the shared spirit of solidarity and need for strong climate policies in a broad range of economies

Authors:

Bo Li
Era Dabla-Norris
Krishna Srinivasan

Compliments of the IMF.
The post IMF | Support for Climate Action Hinges on Public Understanding of Policy first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by Governor Christopher J. Waller at the 2023 Arkansas State University Agribusiness Conference, Jonesboro, Arkansas, February 08, 2023 |
Thank you, Bert, and thank you for the opportunity to talk about where the economy is heading, what the Federal Reserve is doing to get inflation back down to our 2 percent goal, and how all that is likely to affect American agriculture.1
The big picture is that the U.S. economy is adjusting well so far to the higher interest rates that are necessary to rein in inflation. But inflation remains quite elevated, and so more needs to be done. Although economic activity slowed in 2022, I expect the Fed will need to keep a tight stance of monetary policy for some time to slow activity further in 2023. That is what I believe is needed to bring demand and supply into better alignment and lower inflation toward the Federal Open Market Committee’s (FOMC) 2 percent target. Some believe that inflation will come down quite quickly this year. That would be a welcome outcome. But I’m not seeing signals of this quick decline in the economic data, and I am prepared for a longer fight to get inflation down to our target.
So, what is my take on the recent data? It looks like the economy grew at a solid pace in the final quarter of the year, the labor market remained tight, and inflation continued to retreat. After adjusting for inflation, personal consumption grew at around a 2 percent rate, though it contracted in the last two months of the year amid some pretty significant headwinds.
One of those headwinds was high inflation, including for food and agricultural products. After accounting for inflation, spending on food consumed at home fell in 2022 after rising strongly in 2020 and 2021, the effect of both large price increases over the past year and the normalization of spending on groceries, which surged when people stayed home during the pandemic and reversed when they returned to restaurants.
Looking forward, I expect personal consumption will grow modestly and price increases will moderate, and I think such outcomes would bode well for the agricultural sector this year. It looks as though economic activity may be moderating further in the first quarter of 2023, but I expect the U.S. economy to continue growing at a modest pace this year, supported by a strong labor market and by encouraging progress in lowering inflation.
Though we have made progress reducing inflation, I want to be clear today that the job is not done. Inflation is still too high relative to the price stability goal of the dual mandate assigned to the Federal Reserve by Congress. The Fed has defined that goal as 2 percent annual inflation, as measured by the change in the price index for personal consumption expenditures, but another yardstick you could use is when high prices for groceries and other things are no longer front page news, and when farmers can worry less about rising costs for fertilizer and other inputs.
That is where we intend to get to, and thus the FOMC last week increased the target range for the federal funds rate by another 25 basis points, to 4-1/2 to 4-3/4 percent. Our intention is to tighten financial conditions, including raising the cost of credit, to dampen demand and spending to further reduce inflation. Of course, we know that higher interest rates pose challenges for farmers and ranchers who must borrow to smooth out the costs and returns from agriculture over the year. But excessive inflation is a larger challenge because it has the potential to become a lasting problem weighing on economic growth, undermining living standards, and hurting consumers, who farmers depend on. That is why I am determined to get the job done, get high inflation off the front pages, and back to being something that households and businesses don’t think too much about when making decisions.
Continued upward pressure on inflation comes, in part, from a very tight labor market. The Job Openings and Labor Turnover Survey for December continued to show that the demand for workers remains robust, with job openings increasing by over 500,000 at the end of last year. Based on last Friday’s initial estimate, we learned that the U.S. economy created a whopping 517,000 jobs in January, 330,000 more than the solid growth that was expected by economic forecasters. Furthermore, the unemployment rate ticked down to 3.4 percent, the lowest level since 1951.
Such employment gains mean labor income will also be robust and buoy consumer spending, which could maintain upward pressure on inflation in the months ahead. For employers, the very strong labor market makes it hard to find and retain workers. One effect of this tightness is seen in wages and other compensation, which ultimately show up in the prices that consumers pay for goods and services. For example, last year the Employment Cost Index (ECI), which tracks movements in labor costs, including both wages and benefits, increased over 5 percent, the highest rate since 1984. We want to see wages grow but at a pace that is consistent with our goal of stable prices.
We have seen some moderation in compensation growth in recent months but not enough. The ECI for hourly compensation for private industry workers increased at an annual rate of 4 percent over the three months ending in December, a step down from the 4.3 percent gain recorded over the three months ending in September and the 6.3 percent increase in June but still a strong increase. More recently, the 12-month change in a narrower measure of labor costs, average hourly earnings, was about 4-1/2 percent in January, continuing its slow deceleration from 5-1/2 percent last summer. The data are moving in the right direction, but I will watch for further slowing because we don’t want excessive wage increases to be a potential source of higher inflation in the future.
So now let’s talk about inflation. I will start with overall inflation and then focus on the different components, including food. I will talk about what those components can tell us about the direction of overall inflation and how I look at the different parts of inflation in my approach to monetary policy.
Figure 1 depicts inflation measured by two common indexes. No matter how one measures it, inflation has been running too hot for too long. “Overall” or “headline” inflation indexes are measured as the rate of increase in the average price level of a broad group of goods and services, called a market basket. Government statistics on the inflation rate will be a function of the specific goods and services included in the market basket. Including a different set of goods and services in the market basket will result in a different overall inflation rate.
Probably the most often-discussed inflation measure in the United States is one based on the consumer price index (CPI). The CPI is widely used as a cost-of-living index to adjust Social Security and other payments. The CPI puts considerable weight on the prices of food, energy, and shelter. These three items account for about 50 percent of the expenditures in the CPI basket.2
A second measure that is frequently watched is the one I mentioned earlier, the personal consumption expenditures (PCE) price index, which places less weight on food, energy and shelter—they make up about 30 percent of the expenditures in the PCE basket. The FOMC chose the PCE index over the CPI for its inflation target in part because it includes a broader set of goods and services in its market basket and is widely believed to better capture changes in the mix of goods and services purchased by consumers.
Monetary policy works with a lag, and after the Federal Reserve started raising interest rates last March, inflation peaked in the middle of 2022 and has been falling gradually since then. Twelve-month PCE inflation hit a high of 7 percent in June but ended the year at 5 percent. By comparison, over the final three months of 2022, headline inflation was much lower, running at an annualized rate of just 2.1 percent. The difference between the three-month and 12-months changes is a signal of ongoing moderation. As has been the case since the summer, falling energy prices are a big reason for lower inflation in the last few months, though food price inflation also moderated in the final few months of 2022.
These improvements are welcome news, but we need to keep them in perspective. As we can see in the figure, though PCE inflation is down from its peak, it is still quite elevated. And while the recent trend is encouraging, the improvements over the past year have been coming in ebbs and flows and it likely will continue this way. I need to be confident that inflation is declining in a sustained manner towards our 2 percent target, so I will need to see continued moderation in inflation before my outlook changes.
So where do I think inflation is heading? You will often hear economists talk about core inflation, which strips out energy and food prices, which tend to be volatile. The core measure is considered a better guide to the direction of future inflation. You might wonder why it is that the Fed doesn’t just target core inflation in measuring progress toward our price stability goal. There are some good reasons for keeping the focus on overall inflation, and in front of an audience of people who pay a lot of attention to food price inflation, I thought I would take a couple minutes to explain why I consider food and all of the components of inflation to be so important in my approach to setting monetary policy.
The argument for stripping out food and energy prices is that they tend to be quite volatile, with big ups and downs tending to equal out over time, and thus do not provide a clear signal of how inflation in these categories will evolve. One can see the recent volatility in figure 2 that reports 12-month rates of inflation for food and energy. Energy prices were decreasing for most of 2020 (they fell 10 percent during that period) but then switched to very large increases in 2021 and the first half of 2022. In mid-2022 we saw energy prices up about 40 percent from the year before. By December, that retraced to less than a 7 percent increase over 2021. And I’m sure I don’t have to tell anyone that food inflation has been quite high relative to its pre-pandemic average. Of course, food prices haven’t increased as much as energy prices, but food inflation has risen notably in 2021 and 2022 and has been running above 10 percent recently, which is unusually high. I know that farmers have been dealing with sharply rising input costs, and that is a significant factor driving up wholesale and retail prices for many food products. As shown in figure 3, inflation for agricultural chemicals, such as fertilizer, skyrocketed in 2021 and continued up in early 2022 and, though this inflation has moderated in recent months, the price level of agricultural chemicals remains very high.
Core inflation, as shown in Figure 4, didn’t rise as much as headline inflation in this recent period of high food and energy price increases, and lately it hasn’t moderated as much. Core inflation stood at 4.4 percent in December, over double the Fed’s 2 percent target for headline inflation. Core inflation includes a measure of housing services, which is what households pay for rent or the equivalent for those who own their homes. Housing services inflation has been stubbornly high for all of 2022 and is a big factor driving up core inflation. There is good reason to believe rents will moderate significantly over this year and so some people have suggested that the focus should be on a “super core” measure of inflation that excludes food, energy, and housing. That would make inflation look not nearly as bad over the last year or two and also likely not show much improvement in the coming months.
But there are a few reasons why I don’t let these stripped-down measures of inflation shape my views of the inflation environment. First, yes, historically food and energy prices have been volatile, and it has not been unusual to see price increases followed by price declines over fairly short periods of time, but that isn’t the recent history. In the last two years, prices for these goods and services have been moving largely in one direction—up—and even the decline in energy prices we saw in the second half of 2022 hasn’t offset the huge increases earlier.
The second reason that I wouldn’t exclude food, energy, and housing prices, or want to move toward a narrower inflation target, is that, by any measure of headline inflation, they constitute a large share of expenses paid by people. Excluding this large share of consumer spending doesn’t give you an accurate picture of what consumers are facing in their everyday lives, and that is a perspective that policymakers should never forget.
The third reason to include, rather than exclude, these prices in considering inflation is that they make up an even larger share of expenses for lower-income people, who have less savings and other means to deal with the ups and downs of their finances and the economy. Recent research indicates that the share of overall spending that lower-income households dedicate to food, energy and housing is about 1.2 times (or 20 percent more) than the share spent by higher-income households. Because of this disparity, when inflation peaked last summer, lower-income households effectively faced inflation that was a percentage point higher than was paid by higher-income households.3
Lastly, and this is really the bottom line, the Fed has stated that its target for inflation is headline PCE prices. So, to meet the Fed’s price stability objective, policymakers are accounting for all the categories of goods and services that affect households.
With that context, let me take a few minutes on each of the three big categories to highlight how they have been moving, and I think there is some good news. Let’s look at each category in the order of how much consumers spend on them each month. Housing services are about 15 percent of the PCE basket. Figure 5 shows how housing inflation has been evolving both when measured on a 12-month basis (left panel) and 3-month basis (right panel). As I just noted, housing inflation has been stubbornly elevated. This is true if you look at inflation over the past year or just at recent months. But high frequency measures of market rents (for new leases by new tenants) have slowed sharply, suggesting an upcoming slowing in the rate of inflation in this part of the PCE basket. Because rents usually don’t change until leases run out, these recent declines in market rent inflation will only show through to the official inflation measure with a delay. So I expect, over time, that housing inflation will move down to be more in line with core inflation.
Turning to food, which represents about 7.5 percent of consumption in the PCE basket, figure 6 shows that the 12-month change in PCE food prices has greatly outpaced that of core PCE inflation over the past couple of years. More recently, we can see that the 3-month change in the PCE price index for food has slowed considerably, which is a good sign. But food inflation is still above the average annual pace of 1.1 percent over the ten years preceding the pandemic. This ongoing elevated food inflation likely reflects passthrough of the past strong increases in food commodity prices, rising labor and fuel costs, as well as supply-chain bottlenecks in packaging and transportation that have limited supplies amid strong demand. For example, as seen in figure 7, spot prices for cattle and soybeans are well above their levels at the onset of the pandemic, likely boosted by the sharply rising input costs farmers have been facing, which I discussed earlier. However, futures prices for these commodities suggest limited movements in these prices through year end. If this plays out, with a slowdown in wage increases that should occur because of tighter monetary policy, this should help continue to moderate food inflation over the next few years.
Finally, let’s turn to energy inflation. Households spend less than 5 percent of their PCE basket on gasoline, electricity, and heating but, as seen in the left panel of figure 8, the energy price index skyrocketed over the past couple of years, reflecting a surge in crude oil prices after the pandemic recession which was exacerbated by Russia’s invasion of Ukraine. Turning to the 3-month change (the right panel) energy prices have been declining sharply recently and we expect them to continue to decline this year, reflecting the path of crude oil futures prices and the expectation that unusually elevated gasoline margins will, on average, decline over the remainder of this year.
So, what do I take away from all this? I think there are practical implications for getting a clear picture of the economy and setting appropriate monetary policy, and also a reminder for me about the trust I bear as a public official.
Most practically, if I had focused on core inflation over the last two years and tended to look past increases for food and energy, and especially for housing, I would have missed an alarming increase in inflation, and reacted more slowly than my Federal Reserve colleagues and I appropriately did to start bringing down inflation. The Federal Open Market Committee raised interest rates more quickly than it had in more than forty years, and I think the progress we have made on inflation shows how important it was to act so urgently.
Just as importantly, excluding those prices would have neglected how much hardship this high inflation has been for many people, especially lower-income individuals and families. High inflation is a very different experience when you are effectively paying a higher rate than others, when a higher share of your expenses and income are spent on necessities, and when you have little in savings to draw on, as lower-income people do. When I talk about how important it is to win this inflation fight, it is partly in recognition of this inescapable reality for many millions of people.
Fortunately, there are signs that food, energy, and shelter prices will moderate this year. An important factor has been the Federal Reserve’s ongoing fight to lower inflation through tighter monetary policy. We are seeing that effort begin to pay off, but we have farther to go. And, it might be a long fight, with interest rates higher for longer than some are currently expecting. But I will not hesitate to do what is needed to get my job done.
Compliments of the U.S. Federal Reserve.
Footnotes:
1. I am grateful to Katia Peneva for assistance in preparing these remarks. These remarks represent my own views, which do not necessarily represent those of my colleagues on the Federal Reserve Board and the Federal Open Market Committee. Return to text
2. Food at home, energy and housing represent 49 percent of the CPI basket, whereas all food, energy and housing are 54 percent of the market basket. Return to text
3. Based on work by Jake Orchard (2022) that matches consumption spending by income with CPI data. See https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4033572. Return to text

The post Speech: U.S. FED | The Inflation Rate for Necessities: A Look at Food, Energy and Shelter Inflation first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Trade openness increased after the Second World War, but has slowed following the global financial crisis

The free flow of ideas, people, goods, services, and capital across national borders leads to greater economic integration. But globalization, the trend toward these things moving ever more freely between nations, has seen ebbs and flows over the decades.
Those trends are coming into sharper focus this year as policymakers work to understand and address the prospect of geoeconomic fragmentation, which threatens to undo the integration that has improved the lives and livelihoods of billions of people.
Looking back over a century and a half of data, the main phases of globalization are clearly visible using the trade openness metric—the sum of exports and imports of all economies relative to global gross domestic product.
As the Chart of the Week shows, globalization plateaued in the decade and a half since the global financial crisis. This latest era is often referred to as “slowbalization.”

Each of the chart’s five main periods was characterized by different configurations of economic and financial powers, and different rules and mechanisms for economic and financial ties between countries, as we recently highlighted in a recent IMF staff note that discussed the impact of trade fragmentation as well as technological decoupling.

The Industrialization era was a period when global trade—dominated by Argentina, Australia, Canada, Europe, and the United States—was facilitated by the gold standard. It was largely driven by transportation advances that lowered trade costs and boosted trade volumes.
The Interwar era saw a dramatic reversal of globalization due to international conflicts and the rise of protectionism. Despite the League of Nations push for multilateral cooperation, trade became regionalized amid trade barriers and the breakdown of the gold standard into currency blocs.
The Bretton Woods era saw the United States emerge as the dominant economic power with the dollar, then pegged to gold, underpinning a system with other exchange rates pegged to the greenback. The post-war recovery and trade liberalization spurred rapid expansion in Europe, Japan, and developing economies, and many countries relaxed capital controls. But expansionary US fiscal and monetary policy driven by social and military spending ultimately made the system unsustainable. The United States ended dollar-gold convertibility in the early 1970s, and many countries switched to floating exchange rates.
The Liberalization era saw gradual removal of trade barriers in China and other large emerging market economies and unprecedented international economic cooperation, including the integration of the former Soviet bloc. Liberalization accounted for most of the increase in trade, and the World Trade Organization, established in 1995, became a new multilateral overseer of trade agreements, negotiations and dispute settlement. Cross-border capital flows surged, increasing the complexity and interconnectedness of the global financial system.
The “Slowbalization” that followed the global financial crisis has been characterized by a prolonged slowdown in the pace of trade reform, and weakening political support for open trade amid rising geopolitical tensions.

Authors:

Shekhar Aiyar
Anna Ilyina

Compliments of the IMF.
The post IMF | Charting Globalization’s Turn to Slowbalization After Global Financial Crisis first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Union – together with the international G7+ Price Cap Coalition – have today adopted further price caps for seaborne Russian petroleum products (such as diesel and fuel oil). This decision will hit Russia’s revenues even harder and reduce its ability to wage war in Ukraine. It will also help stabilise global energy markets, benefitting countries across the world.
It comes on top of the price cap for crude oil in force since December 2022, and will complement the EU’s full ban on importing seaborne crude oil and petroleum products into the European Union.
Ursula von der Leyen, President of the European Commission, said: “We are making Putin pay for his atrocious war. Russia is paying a heavy price, as our sanctions are eroding its economy, throwing it back by a generation. Today, we are turning up the pressure further by introducing additional price caps on Russian petroleum products. This has been agreed with our G7 partners and will further erode Putin’s resources to wage war. By 24 February, exactly one year since the invasion started, we aim to have the tenth package of sanctions in place.”
Two price levels have been set for Russian petroleum products: one for ”premium-to-crude” petroleum products, such as diesel, kerosene and gasoline, and the other for ”discount-to-crude” petroleum products, such as fuel oil and naphtha, reflecting market dynamics. The maximum price for premium-to-crude products will be 100 USD per barrel and the maximum price for discount-to-crude will be 45 USD per barrel.
The price cap on petroleum products will be implemented from 5 February 2023. It includes a 55-day wind-down period for seaborne Russian petroleum products purchased above the price cap, provided it is loaded onto a vessel at the port of loading prior to 5 February 2023 and unloaded at the final port of destination prior to 1 April 2023.
The price caps for petroleum products and crude oil will be continually monitored to ensure their effectiveness and impact. The price caps themselves will be reviewed and adjusted as appropriate.
The European Commission has also published today a guidance document on the implementation of the price caps.
Background
The Price Cap Coalition is composed of Australia, Canada, the EU, Japan, the UK, and the US.
The EU’s sanctions against Russia are proving effective. They are damaging Russia’s ability to manufacture new weapons and repair existing ones, as well as hinder its transport of material while reducing its revenues from fossil fuels exports. In response to Belarus’ involvement in Russia’s military invasion of Ukraine, the EU has also adopted a variety of sanctions against Belarus in 2022.
The geopolitical, economic, and financial implications of Russia’s continued aggression are clear, as the war has disrupted global commodities markets, especially for agrifood products and energy. The EU continues to ensure that its sanctions do not impact energy and agrifood exports from Russia to third countries.
As guardian of the EU Treaties, the European Commission monitors the enforcement of EU sanctions across the EU.
The EU stands united in its solidarity with Ukraine, and will continue to support Ukraine and its people together with its international partners, including through additional political, financial, and humanitarian support.
Compliments of the European Commission.
The post Ukraine: EU and G7 partners agree price cap on Russian petroleum products first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The ECB has asked people in the euro area how they pay and which payment methods they prefer. The ECB Blog discusses our survey findings and what they mean for the future of cash and digital means of payment.

Digitalisation has changed, and will continue to change, the way people make payments. Today’s payment options are in some ways unrecognisable from what was available a decade ago. Using a device or app, you might pay for your groceries with your watch today, and use an app tonight to share costs and settle up with your dinner date before your plates are even cleared.
But to be clear: cash remains the most frequently used means of payment. More than half of all day-to-day transactions in shops, restaurants, etc. are made using coins and banknotes. Many languages in Europe have expressions such as “cash is king” or “nur Bares ist Wahres” and our survey shows that 60% of citizens want to have the option of using cash.
Cash remains the most frequently used means of payment
More and more people are paying online for their day-to-day purchases. But with the increase of digital payment options, how do we know that a majority of consumers still want physical cash in their pockets? Well, we ask them. The study on the payment attitudes of consumers in the euro area[1] (SPACE) is conducted on a regular basis and sheds light on payment trends. It’s an important activity given the ECB’s responsibility to issue public money and promote the smooth functioning of payment systems. The study demonstrates that cash is still the most frequently used means of payment at point of sale, although its use in the euro area has declined. In 2016 and 2019, 79% and 72% of the total number of transactions at points of sale, such as shops and restaurants, were made in cash.[2] In 2022, this figure had fallen to 59%. While the reason for this change cannot be determined unequivocally, it seems that consumption and payment behaviours learned during the pandemic outlasted the restrictions that caused them.

Chart 1
Number of payments at point of sale

Although most payments were still made in cash, 55% of euro area consumers prefer paying with card or other cashless means of payment. This is mostly due to the convenience of cashless payments: people do not need to carry hard cash. Still, cash is the preferred means of payment for 22% of those surveyed, largely because it helps to track people’s expenses and is more private.
Despite the preference for cashless payments, 60% of euro area consumers state that they value having the option to pay in cash. This shows that people appreciate having a choice when it comes to how they pay. Their decision may then depend on the particular situation or purchase.
What does all this mean for us at the European Central Bank?
A healthy payment system guarantees access to different payment options as well as the freedom to choose.

We will continue to support the availability of different payment instruments

As cash remains widely used and valued, we are committed to maintaining euro cash and will continue to make sure it is available. This means we will guarantee the supply of euro banknotes, coordinate their production, and ensure their security and resistance to counterfeiting. We are working on new themes and designs for future banknotes. The aim is to have banknotes with a look that is even more relatable to European citizens.
Moreover, we will continue to support the availability of different payment instruments. Compared to a decade or more ago, today’s payment options are far more diverse. To keep and further develop this diversity, we are working on the potential issuance of a digital euro. This will add another option for citizens to pay with central bank money, besides cash. We also continue to support point of sale and e-commerce solutions based on instant payments with a pan-European reach and European governance. Today and tomorrow, European citizens will pay with different methods but with the same stable, reliable money: the euro.
Authors:

Ulrich Bindseil, Director General
Doris Schneeberger

Compliments of the European Central Bank.
Footnotes:
1. ECB (2022), “Study on the payment attitudes of consumers in the euro area (SPACE) – 2022”, December.
2. Esselink, H., and Hernandez, L. (2017) “The use of cash by households in the euro area”, Occasional Paper Series, No 201, ECB, November.
The post ECB | Cash or cashless? How people pay first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The fight against inflation is starting to pay off, but central banks must continue their efforts

The global economy is poised to slow this year, before rebounding next year. Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity.
Despite these headwinds, the outlook is less gloomy than in our October forecast, and could represent a turning point, with growth bottoming out and inflation declining.
Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe. Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.
Elsewhere, China’s sudden re-opening paves the way for a rapid rebound in activity. And global financial conditions have improved as inflation pressures started to abate. This, and a weakening of the US dollar from its November high, provided some modest relief to emerging and developing countries.
Accordingly, we have slightly increased our 2022 and 2023 growth forecasts. Global growth will slow from 3.4 percent in 2022 to 2.9 percent in 2023 then rebound to 3.1 percent in 2024.

 
For advanced economies, the slowdown will be more pronounced, with a decline from 2.7 percent last year to 1.2 percent and 1.4 percent this year and next. Nine out of 10 advanced economies will likely decelerate.
US growth will slow to 1.4 percent in 2023 as Federal Reserve interest-rate hikes work their way through the economy. Euro area conditions are more challenging despite signs of resilience to the energy crisis, a mild winter, and generous fiscal support. With the European Central Bank tightening monetary policy, and a negative terms-of-trade shock—due to the increase in the price of its imported energy—we expect growth to bottom out at 0.7 percent this year.
Emerging market and developing economies have already bottomed out as a group, with growth expected to rise modestly to 4 percent and 4.2 percent this year and next.
The restrictions and COVID-19 outbreaks in China dampened activity last year. With the economy now re-opened, we see growth rebounding to 5.2 percent this year as activity and mobility recover.
India remains a bright spot. Together with China, it will account for half of global growth this year, versus just a tenth for the US and euro area combined. Global inflation is expected to decline this year but even by 2024, projected average annual headline and core inflation will still be above pre-pandemic levels in more than 80 percent of countries.

The risks to the outlook remain tilted to the downside, even if adverse risks have moderated since October and some positive factors gained in relevance.
On the downside:

China’s recovery could stall amid greater-than-expected economic disruptions from current or future waves of COVID-19 infections or a sharper-than-expected slowdown in the property sector
Inflation could remain stubbornly high amid continued labor-market tightness and growing wage pressures, requiring tighter monetary policies and a resulting sharper slowdown in activity
An escalation of the war in Ukraine remains a major threat to global stability that could destabilize energy or food markets and further fragment the global economy

A sudden repricing in financial markets, for instance in response to adverse inflation surprises, could tighten financial conditions, especially in emerging market and developing economies

On the upside:

Strong household balance sheets, together with tight labor markets and solid wage growth could help sustain private demand, although potentially complicating the fight against inflation
Easing supply-chain bottlenecks and labor markets cooling due to falling vacancies could allow for a softer landing, requiring less monetary tightening

Policy priorities
The inflation news is encouraging, but the battle is far from won. Monetary policy has started to bite, with a slowdown in new home construction in many countries. Yet, inflation-adjusted interest rates remain low or even negative in the euro area and other economies, and there is significant uncertainty about both the speed and effectiveness of monetary tightening in many countries.

 
Where inflation pressures remain too elevated, central banks need to raise real policy rates above the neutral rate and keep them there until underlying inflation is on a decisive declining path. Easing too early risks undoing all the gains achieved so far.
The financial environment remains fragile, especially as central banks embark on an uncharted path toward shrinking their balance sheets. It will be important to monitor the build-up of risks and address vulnerabilities, especially in the housing sector or in the less-regulated non-bank financial sector. Emerging market economies should let their currencies adjust as much as possible in response to the tighter global monetary conditions. Where appropriate, foreign exchange interventions or capital flow measures can help smooth volatility that’s excessive or not related to economic fundamentals.
Many countries responded to the cost-of-living crisis by supporting people and businesses with broad and untargeted policies that helped cushion the shock. Many of these measures have proved costly and increasingly unsustainable. Countries should instead adopt targeted measures that conserve fiscal space, allow high energy prices to reduce demand for energy, and avoid overly stimulating the economy.
Supply-side policies also have a role to play. They can help remove key growth constraints, improve resilience, ease price pressures, and foster the green transition. These would help alleviate the accumulated output losses since the beginning of the pandemic, especially in emerging and low-income economies.

Finally, the forces of geoeconomic fragmentation are growing. We must buttress multilateral cooperation, especially on fundamental areas of common interest such as international trade, expanding the global financial safety net, public health preparedness and the climate transition.
This time around, the global economic outlook hasn’t worsened. That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting.

Compliments of the IMF.
The post IMF | Global Economy to Slow Further Amid Signs of Resilience and China Re-opening first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the Commission presents a Green Deal Industrial Plan to enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality. The Plan aims to provide a more supportive environment for the scaling up of the EU’s manufacturing capacity for the net-zero technologies and products required to meet Europe’s ambitious climate targets.
The Plan builds on previous initiatives and relies on the strengths of the EU Single Market, complementing ongoing efforts under the European Green Deal and REPowerEU. It is based on four pillars: a predictable and simplified regulatory environment, speeding up access to finance, enhancing skills, and open trade for resilient supply chains.
Ursula von der Leyen, President of the European Commission, said: “We have a once in a generation opportunity to show the way with speed, ambition and a sense of purpose to secure the EU’s industrial lead in the fast-growing net-zero technology sector. Europe is determined to lead the clean tech revolution. For our companies and people, it means turning skills into quality jobs and innovation into mass production, thanks to a simpler and faster framework. Better access to finance will allow our key clean tech industries to scale up quickly.”
A predictable and simplified regulatory environment
The first pillar of the plan is about a simpler regulatory framework.
The Commission will propose a Net-Zero Industry Act to identify goals for net-zero industrial capacity and provide a regulatory framework suited for its quick deployment, ensuring simplified and fast-track permitting, promoting European strategic projects, and developing standards to support the scale-up of technologies across the Single Market.
The framework will be complemented by the Critical Raw Materials Act, to ensure sufficient access to those materials, like rare earths, that are vital for manufacturing key technologies, and the reform of the electricity market design, to make consumers benefit from the lower costs of renewables.
Faster access to funding
The second pillar of the plan will speed up investment and financing for clean tech production in Europe. Public financing, in conjunction with further progress on the European Capital Markets Union, can unlock the huge amounts of private financing required for the green transition. Under competition policy, the Commission aims to guarantee a level playing field within the Single Market while making it easier for the Member States to grant necessary aid to fast-track the green transition. To that end, in order to speed up and simplify aid granting, the Commission will consult Member States on an amended Temporary State aid Crisis and Transition Framework and it will revise the General Block Exemption Regulation in light of the Green Deal, increasing notification thresholds for support for green investments. Among others, this will contribute to further streamline and simplify the approval of IPCEI-related projects.
The Commission will also facilitate the use of existing EU funds for financing clean tech innovation, manufacturing and deployment. The Commission is also exploring avenues to achieve greater common financing at EU level to support investments in manufacturing of net-zero technologies, based on an ongoing investment needs assessment. The Commission will work with Member States in the short term, with a focus on REPowerEU, InvestEU and the Innovation Fund, on a bridging solution to provide fast and targeted support. For the mid-term, the Commission intends to give a structural answer to the investment needs, by proposing a European Sovereignty Fund in the context of the review of the Multi-annual financial framework before summer 2023.
To help Member States’ access the REPowerEU funds, the Commission has today adopted new guidance on recovery and resilience plans, explaining the process of modifying existing plans and the modalities for preparing REPowerEU chapters.
Enhancing skills
As between 35% and 40% of all jobs could be affected by the green transition, developing the skills needed for well-paid quality jobs will be a priority for the European Year of Skills, and the third pillar of the plan will focus on it.
To develop the skills for a people centred green transition the Commission will propose to establish Net-Zero Industry Academies to roll out up-skilling and re-skilling programmes in strategic industries. It will also consider how to combine a ‘Skills-first’ approach, recognising actual skills, with existing approaches based on qualifications, and how to facilitate access of third country nationals to EU labour markets in priority sectors, as well as measures to foster and align public and private funding for skills development.
Open trade for resilient supply chains
The fourth pillar will be about global cooperation and making trade work for the green transition, under the principles of fair competition and open trade, building on the engagements with the EU’s partners and the work of the World Trade Organization. To that end, the Commission will continue to develop the EU’s network of Free Trade Agreements and other forms of cooperation with partners to support the green transition. It will also explore the creation of a Critical Raw Materials Club, to bring together raw material ‘consumers’ and resource-rich countries to ensure global security of supply through a competitive and diversified industrial base, and of Clean Tech/Net-Zero Industrial Partnerships.
The Commission will also protect the Single Market from unfair trade in the clean tech sector and will use its instruments to ensure that foreign subsidies do not distort competition in the Single Market, also in the clean-tech sector.
Background
The European Green Deal, presented by the Commission on 11 December 2019, sets the goal of making Europe the first climate-neutral continent by 2050. The European Climate Law enshrines in binding legislation the EU’s commitment to climate neutrality and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.
In the transition to a net-zero economy, Europe’s competitiveness will strongly rely on its capacity to develop and manufacture the clean technologies that make this transition possible.
The European Green Deal Industrial Plan was announced by President von der Leyen in her speech at to the World Economic Forum in Davos in January 2023 as the initiative for the EU to sharpen its competitive edge through clean-tech investment and continue leading on the path to climate neutrality. It responds to the invitation by the European Council for the Commission to make proposals by the end of January 2023 to mobilise all relevant national and EU tools and improve framework conditions for investment, with a view to ensuring EU’s resilience and competitiveness.
Compliments of the European Commission.
The post The Green Deal Industrial Plan: putting Europe’s net-zero industry in the lead first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The press briefing ahead of the EU-Ukraine summit of 3 February 2023 will take place on Wednesday 1 February 2023 at 14.00. This briefing will be “off the record”.
The press briefing will take place in a hybrid format: EU accredited journalists will be able to participate and ask questions either in person at the Justus Lipsius press room or remotely.
To attend the events remotely, please use this link to register and have the possibility to ask questions.
EU accredited journalists who already registered for previous high level press events in 2022 do not need to do it again.

Deadline for registration: Wednesday 1 February 2023 at 13.00. 

Further instructions will be sent to all registered participants shortly after the deadline.
Compliments of the European Council, Council of the European Union.
The post Press briefing ahead of the EU-Ukraine summit of 3 February 2023 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

WASHINGTON –United States Secretary of Homeland Security Alejandro N. Mayorkas and European Commissioner for Internal Market Thierry Breton, released the following joint statement on the cooperation between the United States and the European Union in the fields of Cyber Resilience:
“Cyberspace knows no borders and it is only by working closely together with our allies and likeminded partners that we will succeed in securing our people, critical infrastructure, and businesses against malicious cyber activities. Today we launch a new chapter in our transatlantic partnership with three workstreams focused on deepening our cooperation on cyber resilience.
“In the context of the EU-US Cyber Dialogue, the US Department of Homeland Security and the European Commission’s Directorate-General for Communications Networks, Content and Technology intend to launch dedicated workstreams in the fields of Information Sharing, Situational Awareness, and Cyber Crisis Response; Cybersecurity of Critical Infrastructure and Incident Reporting Requirements; and Cybersecurity of Hardware and Software. The workstreams are expected to invite and involve as appropriate other relevant institutions and agencies working on cyber issues, including the European External Action Service, the Directorate-General for Defence, Industry, and Space, and the U.S. Department of State. In addition, a cyber fellowship led by DHS and DG CNCT is expected to be launched with a pilot that will involve an exchange of cyber experts in 2023.
“Today, we discussed the initial deliverables, which include:

Deepening structured information exchanges on threats, threat actors, vulnerabilities, and incidents to support a collective response to defend against global threats to include crisis management and support of diplomatic responses.
Finalizing a working arrangement between ENISA and CISA to foster cooperation and sharing of best practices.
Collaborating on the topic of cyber incident reporting requirements for critical infrastructure, including guidelines and templates.
Collaborating on the cybersecurity of software and hardware.
Exploring how we can work together to better protect civilian space systems.

“The launch of these workstreams reflects key elements in the joint statement between President Biden and President von der Leyen from March 2022, which called for deeper cooperation and more structured cybersecurity information exchanges on threats. The first deliverables from these workstreams are expected to be reported on at the 9th EU-US Cyber Dialogue, foreseen in the second half of 2023.”
Compliments of the European Commission.
The post Joint Statement by United States Secretary of Homeland Security Mayorkas and European Union Commissioner for Internal Market Breton first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.