The move comes amid a decline in offshore financial centers’ share of global FDI
The United States recorded the largest increase of inward foreign direct investment of all economies in 2021. The latest release of the IMF’s Coordinated Direct Investment Survey shows the US position increasing by $506 billion, or 11.3 percent, last year.
For the 112 economies that reported data, inward FDI positions rose by an average of 7.1 percent in national currencies. In dollar terms, this global growth figure translates to only 2.3 percent, due to the recent strengthening of the greenback.
As the Chart of the Week shows, the United States is now the world’s top destination for FDI, while China has moved up to the third position. It also shows how smaller economies take prominent positions among the global top 10. The Netherlands, Luxembourg, Hong Kong SAR, Singapore, Ireland, and Switzerland all appear on this list even though none of these economies rank among the top 10 when it comes to gross domestic product.

The apparent disconnect between FDI data and the real economy comes down to the fact that these numbers are fundamentally a set of financial statistics. They show cross-border financial flows and positions between entities tied to each other by a direct or indirect ownership share of at least 10 percent. Such flows can end up as investments into productive activities within a country, like funds going into new factories and machinery, but they can also be purely financial investments with little to no link to the real economy.
For instance, many multinational companies set up special purpose entities in offshore financial centers where funds just flow through the economy, as an intermediate step towards their final destination. These entities are often established to obtain tax or regulatory benefits and can inflate FDI data considerably even though they have relatively little tangible impact on the host economy.
Research by Damgaard, Elkjaer, and Johannesen and Lane and Milesi-Ferretti shows how offshore financial centers play an outsized role in global FDI statistics, which increased even further in the years following the 2008 global financial crisis. The latest data from the CDIS shows that offshore financial centers still account for a disproportionately high share of global FDI. However, their share has gradually declined since 2017, while that of the largest economies such as the United States and China has increased.
The exact drivers of this development are hard to disentangle, but are likely linked to several policy initiatives. For example, the fall in the offshore financial centers’ share of global FDI comes after the US Tax Cuts and Jobs Act took effect in 2018.
This legislation reduced incentives to keep profits in low-tax jurisdictions and led to a substantial US repatriation of funds from foreign subsidiaries. Additionally, sustained international efforts to reduce tax avoidance, like the OECD/G20 Base Erosion and Profit Shifting initiative, may have halted some flows to offshore financial centers.
This highlights the continued need for comprehensive and timely statistics to better understand these developments and to guide policymakers in their decision-making on international investment and tax policies. In addition to the CDIS, the IMF has launched an initiative to collect data on special purpose entities and released the first set of SPE statistics earlier this year. Country reporting of comprehensive FDI statistics was also an important part of the second phase of the G20 Data Gaps Initiative, with 19 out of 20 member economies now reporting data.
Even more policy-relevant data are in the pipeline. In close collaboration with its members and other international organizations, the IMF is updating the balance of payments manual to strengthen its relevance for surveillance and policy analysis.
Authors:

Jannick Damgaard
Carlos Sánchez-Muñoz

Compliments of the IMF.
The CDIS is the only worldwide survey of FDI positions and is conducted annually by the IMF. The database presents detailed data on bilateral FDI relations among economies. It aims to provide a geographic distribution of inward and outward FDI worldwide, contribute to a better understanding of the extent of globalization, and support the analysis of cross-border linkages and spillovers in an increasingly interconnected world.
The post IMF | United States Is World’s Top Destination for Foreign Direct Investment first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

I. Introduction
The U.S.-EU Trade and Technology Council (TTC) met outside Washington, D.C., on December 5, 2022.  The meeting was co-chaired by U.S. Secretary of State Antony Blinken, U.S. Secretary of Commerce Gina Raimondo, U.S. Trade Representative Katherine Tai, European Commission Executive Vice President Margrethe Vestager, and European Commission Executive Vice President Valdis Dombrovskis, joined by U.S. Deputy Under Secretary of Labor Thea Lee, Jamaica Minister for Information Communication Technology Floyd Green, and Kenya Cabinet Secretary for Information, Communication and the Digital Economy Eliud Owalo.
The TTC is a key mechanism to support stronger transatlantic relations and to deliver concrete outcomes.  We reaffirm that international rules-based approaches to trade, technology, and innovation that are founded on solid democratic principles and values can improve the lives of our citizens and generate greater prosperity for people around the world.  Through the TTC’s ten working groups, we are supporting sustainable, inclusive economic growth and development, promoting a human-centric approach to the digital transformation, and ensuring that international norms and the international trade rulebook are respected and reflect our shared values. We will continue to work together to modernize and reform the World Trade Organization (WTO) as set out in the WTO MC12 Outcome Document.
Geostrategic challenges, including Russia’s full-scale invasion of Ukraine and increased assertiveness of autocratic regimes, have reinforced the importance of our shared democratic values, commitment to universal human rights, and leadership role in upholding an international rules-based order.  The United States and the European Union reiterate our strong condemnation of Russia’s illegal and unjustifiable war of aggression against Ukraine and reaffirm our unwavering commitment to stand firmly with Ukraine for as long as it takes to ensure Ukraine’s sovereignty, independence, and territorial integrity.  We condemn attacks by Russia on Ukraine’s infrastructure and will continue supporting Ukraine in securing, maintaining, and rebuilding this infrastructure, including its telecommunications and internet infrastructure. We resolve to continue to impose severe and immediate costs on Russia and hold it accountable for its brutal war against Ukraine, including through unprecedented cooperation on sanctions-related export restrictions, and countering Russian disinformation.  We will also hold Belarus to account for its complicity in Russia’s war. The TTC Working Groups on Export Controls and on Misuse of Technology have made critical contributions to this successful and ongoing collaboration. The TTC Working Groups on Data Governance and Technology Platforms and on Misuse of Technology Threatening Security and Human Rights are coordinating to understand and address the spread of Russian information manipulation and interference, particularly in the context of Russia’s aggression against Ukraine, and its impact on third countries, notably in Africa and Latin-America.
The impact on our supply chains of Russia’s full-scale invasion of Ukraine has further underscored that we share an urgent need to identify and address supply chain vulnerabilities. The United States and the European Union recognize that the concentration of resources in key supply chains can expose our economies to challenging disruptions.  We plan to explore coordinated actions to foster diversification and make key supply chains more resilient.
To support our shared desire of tackling climate change, the United States and the European Union intend to launch a new Transatlantic Initiative for Sustainable Trade to advance our shared objective of achieving a green and sustainable future. We also took stock of the work of the dedicated U.S.-EU Task Force on the Inflation Reduction Act and noted the preliminary progress made. We acknowledge the EU’s concerns and underline our commitment to address them constructively. We underline the TTC’s role in achieving this and in supporting a successful and mutually supportive green transition with strong, secure, and diverse supply chains that benefit businesses, workers, and consumers on both sides of the Atlantic.
The United States and the European Union are establishing a Talent for Growth Task Force that will pursue our collective objective to recognize and develop the talent of our working-age populations.
II. Key Outcomes of the Third TTC Ministerial
1. Digital Infrastructure and Connectivity
Joint Initiatives with Jamaica and Kenya
The United States and the European Union are supporting secure and resilient digital connectivity and information and communication technology and services (ICTS) supply chains in third countries, provided by trusted suppliers.  As a first step, we intend to support inclusive ICTS projects in Jamaica and Kenya based on our common overarching principles.  This work reflects our commitments under our Global Gateway and Partnership for Global Infrastructure and Investment initiatives.

Cooperation on connectivity with Jamaica:  In cooperation with the government of Jamaica and other Jamaican stakeholders, we will connect over 1,000 public schools and children’s homes around Jamaica to robust, inclusive, and secure internet service, strengthen the digital competencies of teachers, and support the use of digital technologies by micro-, small-, and medium-sized enterprises.  Our efforts will also assist Jamaica’s electric utility, Jamaica Public Service, to expand reliable and trustworthy public Wi-Fi infrastructure in the New Kingston neighborhood of Jamaica’s capital, with the potential to expand the service across the country.  We also intend to support secure and resilient rural broadband connectivity provided by trusted suppliers in the country.

Cooperation on connectivity with Kenya:  In cooperation with the government of Kenya, we will support the implementation of Kenya’s 2022-2032 National Digital Masterplan by expanding school connectivity in Kenya and bridging gaps in last-mile connectivity.  First efforts will include a study on scalable solutions to expand school connectivity in Kenya, building fiber optic connections to schools in remote areas, a policy roadmap for affordable, secure, trustworthy and meaningful connectivity, and training options to develop the next generation of digital professionals.  We also will provide technical assistance to help Kenya update its Information and Communications Act and 5G Strategy in line with the principles set for high-quality global infrastructure projects at the TTC meeting in Paris-Saclay, France on May 16, 2022.

The United States and the European Union intend to expand our coordination on financing digital infrastructure projects in third countries, including through a Memorandum of Understanding between the U.S. Development Finance Corporation (DFC) and the European Investment Bank (EIB), which aims to enable increased collaboration on financing for secure connectivity in third countries.
Future Secure Connectivity Projects
The United States and the European Union recognize the importance of cooperating on trust and security in the ICT ecosystem.  We welcome projects that strengthen the resilience of that ecosystem, including subsea cables. The TTC Working Group on ICTS security and competitiveness intends to discuss transatlantic subsea cables’ connectivity and security, including alternative routes, such as the transatlantic route to connect Europe, North America and Asia. We also welcome supplier diversification efforts in ICTS supply chains and continue to discuss market trends towards open, interoperable approaches, alongside trusted, established architectures, in a technology neutral way.
2. Cooperation on New and Emerging Technologies
Artificial Intelligence (AI) Roadmap and Pilot Project on Privacy-Enhancing Technologies and Collaboration on AI and Computing Research for the Public Good
To fulfill our commitment on developing and implementing trustworthy AI, the United States and the European Union have issued a first Joint Roadmap on Evaluation and Measurement Tools for Trustworthy AI and Risk Management (AI Roadmap) and collected perspectives from relevant stakeholders.  This roadmap will inform our approaches to AI risk management and trustworthy AI on both sides of the Atlantic, and advance collaborative approaches in international standards bodies related to AI.  In conjunction with this effort, we aim to build a shared repository of metrics for measuring AI trustworthiness and risk management methods, which would support ongoing work in other settings such as the OECD and GPAI.  Our cooperation will enable trustworthy AI systems that enhance innovation, lower barriers to trade, bolster market competition, operationalize common values, and protect the universal human rights and dignity of our citizens.
Recognizing the importance of privacy in advancing responsible AI development, the United States and the European Union will work on a pilot project to assess the use of privacy enhancing technologies and synthetic data in health and medicine, in line with applicable data protection rules.
A joint study on the impact of AI on the workforce was finalized, with U.S. and EU case studies on hiring and logistics.
The United States and European Commission intend to bring together experts to explore collaboration on research projects in artificial intelligence and computing, that can benefit other partner countries and the global scientific community. This cooperation will aim at jointly addressing challenges in key focus areas such as extreme weather and climate forecasting; health and medicine; electric grid optimization; agriculture optimization; and emergency response management.
Collaboration on Quantum
The United States and the European Union plan to establish an expert task force to reduce barriers to research and development collaboration on quantum information science and technology, develop common frameworks for assessing technology readiness, discuss intellectual property, and export control-related issues as appropriate, and work together to advance international standards. This approach could serve as a basis for more enhanced cooperation in other emerging technology areas.
Electric Vehicle Charging
On May 16, 2022, at the TTC meeting in Paris-Saclay, the United States and the European Union decided to cooperate on Megawatt Charging Systems (MCS) standard for heavy-duty vehicles.  We welcome the progress on the physical prototype developed by industry.  We intend to continue working towards a common international standard to be adopted by 2024 at the latest to provide the highest level of interoperability, safety and security.
In parallel, we intend to develop in 2023 joint recommendations for government-funded implementation of electro-mobility charging infrastructure that aims to advance electric vehicle adoption in the United States and the European Union, as well as recommendations for future public demonstrations of Vehicle to Grid Integration pilots.  As intermediate steps, the United States and the European Union organized a stakeholder conference, are publishing the results of the ongoing research work, and have prepared public information on vehicle-to-grid integration and smart charging interoperability.
Other Standards and Research Cooperation
We have launched workstreams to increase standards cooperation on Additive Manufacturing, Recycling of Plastics, and Digital Identity, with plans to launch new workstreams on Post-Quantum Encryption and Internet of Things (IoT), with an initial focus on technical and performance standards for cybersecurity to be discussed in the U.S.-EU Cyber Dialogue.
Following the signing of the Administrative Arrangement in May 2022, we rolled out the Strategic Standards Information (SSI) mechanism, which will enable the United States and European Union to voluntarily share information about international standardization activities and promptly react to common strategic issues.  This mechanism will enable deepened cooperation to help shape global standards at international institutions such as the International Telecommunication Union (ITU), where we look forward to working with all ITU members and its new leadership.
Looking to the next TTC ministerial, and in coordination with key stakeholders, the United States and the EU intend to develop a common vision on research and development beyond 5G and 6G.
3. Building Resilient Semiconductor Supply Chains
Since the TTC ministerial meeting in Paris-Saclay, the United States passed the CHIPS and Science Act into law, and the European Chips Act has made steady progress in the co-legislative process.  The United States and the European Union recognize the importance of cooperating on promoting resilient supply chains.
To achieve this, the U.S. Department of Commerce and the European Commission are entering into an administrative arrangement to implement an early warning mechanism to address and mitigate semiconductor supply chain disruptions in a cooperative way.  The mechanism draws on the results of last summer’s pilot in which the United States and the European Union explored and tested approaches to the exchange of information and cooperation in case of disruptive events.
Transparency is a key tool to avoid concerns over public support programs.  Today, the U.S. Department of Commerce and the European Commission are entering into an administrative arrangement memorializing a common mechanism for reciprocal sharing of information about public support provided to the semiconductor sector to support transparency.  We intend to work with other likeminded countries to make similar commitments to transparency.
For our respective public support programs, we will also seek to exchange information and methodologies, share best practices, and develop a common understanding of market dynamics.  This includes:

Working with industry to promote initiatives aimed at advancing the transparency of demand for semiconductors;
Improving our understanding of forecasted global semiconductor demand to inform our common policy objective of avoiding over capacity and bottlenecks.  For this purpose, we expect to meet regularly and share information on demand forecast methodologies;
Exchanging information and best practices regarding investment approaches and terms and conditions for public support;
Exchanging areas of interest and exploring cooperative initiatives in research in semiconductors.

Building on this baseline of transparency, cooperation on potential disruptions, and a common understanding of global demand, we will work to avoid subsidy races and market distortions, and ensure a more resilient, sustainable and innovative semiconductors value chain.
4. Promoting Our Values Online
Declaration for the Future of the Internet
The principles of the Declaration for the Future of the Internet (DFI) – protection of universal human rights and fundamental freedoms, a global internet, and inclusive and affordable access to the Internet– are global in scope and enjoy support from the United States and the European Union.    The United States and the European Union again demonstrated their commitment to these principles on November 2, 2022, in Prague, where they engaged with the multi-stakeholder community, welcomed new countries that endorsed the Declaration, and reaffirmed their commitment to its vision and principles.
Protecting Human Rights Defenders Online
The United States and the European Union are deepening cooperation and mutual learning between U.S.- and EU-funded emergency mechanisms, in order to expand resources in support of human rights defenders worldwide.  We promote an open, free, global, interoperable, reliable, and secure Internet, in line with universal human rights, and seek to eliminate the use of arbitrary and unlawful surveillance to target human rights defenders. To underline our shared commitments, the European Union and the United States have released a joint statement on protecting human rights defenders online.
Addressing Internet Shutdowns
The United States and the European Union reiterate our alarm at the increasingly entrenched practice of government-imposed Internet shutdowns.  To address this issue, we have facilitated the creation of a multi-stakeholder group of technical experts who will document Internet shutdowns and their effects on society as rapidly and comprehensively as possible.  The group released its first report on recent Internet shutdowns.  We look forward to drawing on the findings of this report and future ones in our diplomatic work.
5. Enhancing Transatlantic Trade
Increasing the Use of Digital Tools
Digital technology can make it easier for companies, particularly small- and medium-sized enterprises, to engage in trade.  Prior to the next TTC co-chairs meeting, the United States and the European Union therefore plan to compile and exchange information on respective initiatives to use digital technology to simplify or reduce the cost of commercial actors’ interactions with our governments in relation to trade-related policy, legal requirements, or regulatory requirements.  The United States and the European Union intend to then build on this information exchange to develop joint best practices for the use of digital tools and to discuss how best to promote compatibility of such digital tools.
Mutual Recognition Agreements and Conformity Assessment-Related Initiatives
The United States and the European Union recognize the importance of mutual recognition agreements and conformity assessment-related initiatives for U.S. and EU stakeholders engaged in transatlantic trade in a range of sectors.  Before the next TTC co-chairs meeting, the United States and the European Union plan to explore ways in which the increased use of digital technology, where permissible, may help U.S. and EU stakeholders better utilize existing mutual recognition agreements to facilitate increased transatlantic trade.
The United States and the European Union will also explore the feasibility of extending the scope of the existing U.S.-EU Marine Equipment Mutual Recognition Agreement to include certain radio equipment.
The United States and the European Union also support regulators’ work on considering the necessary steps to extend the scope of the EU-U.S. Mutual Recognition Agreement annex for Pharmaceutical Good Manufacturing Practices to include vaccines and plasma-derived pharmaceuticals for human use, as discussed by the Joint Sectoral Committee.
With a view to providing mutual benefits and enhancing transatlantic trade, the United States and the European Union will continue exploring opportunities to improve cooperation in conformity assessment, including in machinery and other sectors.  This work will include exploring opportunities to improve cooperation on horizontal approaches to conformity assessment.
6. Trade, Security and Economic Prosperity
Cooperation on Export Controls and Sanction-Related Export Restrictions
Regarding cooperation on export control, we are looking at how to simplify transatlantic trade with regard to exports and re-exports of dual-use items and technologies while ensuring appropriate protection against misuse through pilot exchange of information on the disposition of U.S. exports to Europe and vice versa. We are facilitating trade between the United States and the European Union by more coordinated adoption and publication of multilateral control list revisions. We continue to consult on new regulatory actions. We are also planning to conduct coordinated export control outreach with partners. We are taking additional steps to enhance enforcement collaboration between the United States and the European Union, including through the exchange of best practices as appropriate and with a view to promoting the consistent application of sanction-related export restrictions targeting Russia and Belarus through regular information exchange, including regarding authorization and denial decisions.  Lastly, the United States and the European Union will cooperate on the export controls of sensitive and emerging technologies, while ensuring appropriate protection against misuse with a view to facilitate legitimate transatlantic trade and research interests.
Investment Screening
We have deepened our cooperation on investment screening through technical exchanges, including an in-person tabletop exercise in Brussels. We also continue to discuss security risks related to specific sensitive technologies, including those related to critical infrastructure, and to holistically assess the policy tools available to address these risks. The United States and the European Union underscore the importance of comprehensive, robust foreign investment screening mechanisms on both sides of the Atlantic in order to address risks to national security and, within the European Union, for public order, while remaining open for investment.  The United States and the European Union will continue to support the development and implementation of these mechanisms. The working group will be hosting a public stakeholder outreach event on the work of the Investment Screening Working Group in mid-December.
Addressing Non-Market Economic Policies and Practices
The United States and the European Union have shared concerns about the threat posed by a range of non-market policies and practices, such as those used in the medical devices sector and those involving government-owned or government-controlled investment funds. Following input received from stakeholders, the United States and the European Union have started exchanging information on the market situation of U.S. and EU medical devices companies in China, in order to better understand the impact of non-market policies and practices on U.S. and EU companies. The United States and the European Union are also deepening their exchanges to identify shared concerns relating to increasing use of the aforementioned investment funds. The two sides plan to work together on exploring which policy tools could address non-market policies and practices, including those affecting our medical devices companies. To that end, we will continue building a shared understanding of China’s economic and industrial directives and other non-market policies and practices, and develop coordinated action to foster supply chain diversification, build resilience to economic coercion, and reduce dependencies.
Addressing Economic Coercion
The United States and the European Union are increasingly concerned with the use of economic coercion that that seeks to undermine our legitimate choices and those of our partners at all levels of development, as well as global security and stability. We resolve to identify and address economic coercion and explore potential coordinated or joint efforts, bilaterally and with other likeminded partners, to improve our assessment, preparedness, resilience, deterrence, and responses to economic coercion.
7. Trade-Related Environment, Labor, and Health Initiatives
Transatlantic Initiative on Sustainable Trade
The United States and the European Union have already taken, and will continue to take, important policy steps to reduce carbon emissions and promote the accelerated deployment and uptake of environmental technologies.  Today we launch a transatlantic initiative on sustainable trade.
This initiative will enhance work across the TTC that strives to support the transition to low-carbon economies by identifying actions in key areas of trade and environmental sustainability that support our shared twin goals of a green and sustainable future and to increase transatlantic trade and investment. We intend to explore areas of cooperation to support these twin goals, including where there is opportunity to measurably decarbonize our energy intensive industries, and facilitate the deployment of goods and services essential to the transition to more circular, and net-zero, economies.
Trade and Labor Dialogue
The first principal-level session of Trade and Labor Dialogue (TALD) offered an opportunity to exchange views with senior representatives from labor, business, and government on both sides of the Atlantic.  During today’s meeting, we built on the technical meeting of September 20, 2022 and discussed the critical importance of eradicating forced labor in global trade and supply chains.  We explored how we can translate shared transatlantic values concerning combatting forced labor into concrete actions that promote internationally recognized labor rights, and promote resilient and sustainable trade and supply chains.
Health Information for Research
The United States and the European Union intend to work together intensively in the appropriate fora to facilitate the exchange of health information to support research, innovation, and advancements in public health in compliance with applicable legal requirements governing the protection of data, including the protection of health data.
8. Developing Talent for the Digital Transition and Economic Growth
The United States and the European Union are launching a Talent for Growth Task Force that will bring together government and private sector leaders from business, labor, and organizations that provide training,building on existing initiatives on both sides of the Atlantic.  The goal of the task force is to exchange best practices, and to serve as a catalyst for innovative skills policies.
We have a collective objective to develop systems of training for our working-age populations and means of recognizing the talent of all our people. The Talent for Growth Task Force will advise the TTC on the actions needed to achieve this. It will work with and encourage our respective communities to learn from each other, promote common taxonomies and tools, and inspire innovation on training programs; engage the public on the rewarding careers in technology sectors, including a focus on underrepresented communities; exchange on training programs that meet the changing demands of the market; build a skilled workforce that fosters growth and uninterrupted supply chains; facilitate small- and medium-sized businesses access to relevant skilled professionals  to foster competition; and help generate middle-income jobs to create a more resilient and equitable middle class.
III. Conclusion
These outcomes represent tangible progress across all workstreams established under the TTC.  We are committed to advancing these projects and developing new ones as we deepen and grow the transatlantic economic relationship, based on our shared values and principles.  The co-chairs intend to meet again in mid-2023 in Europe to review our joint work and discuss new ways to expand our partnership.
Compliments of the Office of the United States Trade Representative.
The post U.S.-EU Joint Statement of the Trade and Technology Council first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The international Price Cap Coalition has finalised its work on implementing an oil price cap on Russian seaborne crude oil. EU Member States in the Council have also just approved in parallel its implementation within the EU.
The cap has been set at a maximum price of 60 USD per barrel for crude oil and is adjustable in the future in order to respond to market developments. This cap will be implemented by all members of the Price Cap Coalition through their respective domestic legal processes.
Ursula von der Leyen, President of the European Commission, said, “The G7 and all EU Member States have taken a decision that will hit Russia’s revenues even harder and reduce its ability to wage war in Ukraine. It will also help us to stabilise global energy prices, benefitting countries across the world who are currently confronted with high oil prices.”
While the EU’s ban on importing Russian seaborne crude oil and petroleum products remains fully in place, the price cap will allow European operators to transport Russian oil to third countries, provided its price remains strictly below the cap.
The price cap has been specifically designed to reduce further Russia’s revenues, while keeping global energy markets stable through continued supplies. It will therefore also help address inflation and keep energy costs stable at a time when high costs – particularly elevated fuel prices – are a great concern in the EU and across the globe.
The price cap will take effect after 5 December 2022 for crude and 5 February 2023 for refined petroleum products [the price for refined products will be finalised in due course]. It will enter into force simultaneously across all Price Cap Coalition jurisdictions. The price cap also provides for a smooth transition – it will not apply to oil purchased above the price cap, which is loaded onto vessels prior to 5 December and unloaded before 19 January 2023.
More Information
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.
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.
The post G7 agrees oil price cap: reducing Russia’s revenues, while keeping global energy markets stable first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, Lustrum Symposium organised by Dutch Financial Law Association | Amsterdam, 1 December 2022 |

“We can’t overstate the importance of European Climate Law and the EU is setting the bar high,” says Executive Board member Frank Elderson. “As a central bank and banking supervisor, our policies will duly take into account the objectives of the Climate Law.”

I am honoured to speak at this 20th anniversary dinner, with so many distinguished lawyers around me. In this setting, I feel quite comfortable dwelling on legal issues for a while.
A topic close to my heart – apart from the law – is the ongoing climate and environmental crises. I am glad that we have long since moved on from the time when only scientists and activists were concerned with this topic. It is now high on policymakers’ agendas, as we saw at the recent United Nations Conference of Parties (COP27) at Sharm el-Sheikh, at which – along with world leaders and a wide range of policymakers and interest groups – the ECB was also represented.
I was struck by one story in particular.[1] The tiny Pacific nation of Vanuatu is badly exposed to cyclones and rising sea levels. To the inhabitants of Vanuatu, climate change is a human rights issue. And, as Vanuatu’s president, Nikenike Vurobaravu, stated, “we are measuring climate change not in degrees of Celsius or tonnes of carbon, but in human lives.”
Vanuatu now plans to ask the UN General Assembly to seek an opinion from the International Court of Justice on the human rights implications of the climate crisis. That opinion could determine the rights of countries most exposed to climate change. It could also touch on the obligations of those most responsible for driving the climate crisis.
Let’s now focus on Europe and the possible implications of these developments in international law for my own institution, the ECB. Under the Paris Agreement adopted at COP21 in 2015, many countries committed to the long-term goal of holding the increase in the global average temperature to well below 2°C above pre-industrial levels.[2]
To fulfil its commitment as one of parties to the Paris Agreement, the EU last year adopted the European Climate Law.[3] The implications of the Climate Law are significant. Before going into why, let me first explain what the Climate Law does.
The Climate Law has three key elements. The first is its objective that the EU reduce its greenhouse gas emissions by at least 55% by 2030, with a new reduction target to be set for 2040. The EU should achieve climate neutrality by 2050 and aim to achieve negative emissions thereafter. The second important element is to ensure that we move towards that objective. The European Commission has established a framework for assessing concrete progress and checking whether national and Union measures are consistent with the objective. It will issue regular reports on the conclusions of these assessments. The third and last element is to ensure that we use the most effective instruments to achieve the objective. The introduction of a European Scientific Advisory Board on Climate Change promotes the idea that all policies should be based on up-to-date scientific insights.
It is hard to overstate the importance of the Climate Law. The EU is setting the bar high. Allow me to quote what the law says about the transition to climate neutrality. It “requires changes across the entire policy spectrum and a collective effort of all sectors of the economy and society […] all relevant Union legislation and policies need to be consistent with, and contribute to, the fulfilment of the climate-neutrality objective while respecting a level playing field”[4].
We are starting to see this happen. From housing to energy and from transport to finance, the EU is introducing reforms to put Europe on track to become the first climate-neutral continent by 2050. So how will the Climate Law affect the ECB? For me, as a member of the ECB’s Executive Board and the Vice-Chair of its Supervisory Board, this question is relevant to both our monetary policy and banking supervision tasks.
This question matters because, in the field of the environment, the ECB is a policy taker, not a policymaker. So what does the ECB need to take from the policy and objectives reflected in the Climate Law? To answer this, we first need to consider whether the ECB is bound by the Climate Law. If so, the ECB would have to take measures towards achieving the climate-neutrality objective.
There is more, though. If the ECB is bound by the law, it would also have to ensure continuous progress in enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change. Moreover, it would have to ensure that its policies on adaptation are coherent with and supportive of other such policies in the Union.[5]
That is quite a full plate. So, is the ECB bound by the Climate Law? There are definitely indications that it is. The Climate Law is addressed to “relevant Union institutions and the Member States”. In the European Anti-Fraud Office (OLAF) judgment[6], the European Court of Justice made it clear that, in principle, the ECB is bound by all regulations which bind the Union. There is no distinction to be made between the different institutions, bodies, offices and agencies. All are equal under the law, so to say.
However, the word “relevant” is ambiguous. Does it refer to any institution, where relevant? That would mean that every EU institution should comply with the Climate Law, whenever it develops policy or takes action relevant to the objective of the law. Or does it refer only to those institutions with competence to create policy relevant to achieving the objective of the Climate Law? The ECB would be directly bound by the law under the first interpretation but not under the second.
The Climate Law is not crystal clear on this point. It does not define “relevant institution”. But there are a number of strong indications that the ECB is not a relevant institution under the Climate Law. Let me explain why. The Climate Law does not contain many specific obligations. The law sets out a destination: climate neutrality. It does not tell us how to get there. How we do so will depend on environmental and economic policymaking. This is a Union competence the ECB does not have.
There are further arguments that support this interpretation. If the ECB is deemed to be a relevant institution, then it would have to submit its policies to the Commission for assessment and the Commission would monitor progress. That would be a fundamental change to the ECB’s accountability framework. Under current law, the ECB is only directly accountable to the European Parliament and the European Court of Auditors.[7]
A final reason for this view is institutional. If the ECB were deemed to be a relevant institution within the meaning of the Climate Law, this would be an implicit acceptance that the Council of the EU and the Parliament could set additional objectives for the ECB through the ordinary legislative procedure. However, the ECB’s objectives are laid down in the Treaty on the Functioning of the European Union (TFEU)[8], and their scope cannot be changed by secondary legislation. That would be a violation of the Treaty. Changing the ECB’s objectives requires a special procedure.
The ECB is – it seems – not directly bound by the Climate Law. So, can we ignore it? Not at all. To do so would be a violation of the Treaties. Article 11 of the TFEU provides that environmental protection requirements must be “integrated into the definition and implementation of the Union’s policies and activities”. This imposes an obligation on the ECB to take into account and consider the objectives of the Climate Law when performing its tasks. In addition, Article 11 could be understood as supporting measures which incorporate environmental considerations as secondary aims. This means the ECB could rely on Article 11 to support the climate neutrality dimension of measures falling within its monetary policy or supervisory competences. But it does not go so far as to establish an autonomous competence to adopt environmental measures. In addition, under Article 7 of the TFEU, the activities and policies of the ECB need to be consistent with Union law and therefore also with the Climate Law.
We have diligently assessed how these provisions of the Treaty, together with the Climate Law, affect our tasks, always being guided by and staying within our mandate. The ECB is not an environmental policy institution. The ECB is a central bank and banking supervisor. As such, let me share with you what we have done to reflect these legal requirements in the common fight against the climate crisis within our mandate.
First of all, when defining and implementing monetary policy, we need to take into account environmental protection requirements, such as the climate-neutrality objectives contained in the Climate Law. And that is what we have done. Last year the Governing Council adopted a comprehensive action plan[9] to further incorporate climate change considerations into its monetary policy framework.
There are a number of actions to which the ECB is committed under this plan. Let me now give a very concrete example of how the ECB has taken into account climate change considerations in the context of its corporate sector purchase programme (CSPP).
Under the CSPP, the Eurosystem purchases corporate bonds for monetary policy purposes. Right now we are in the reinvestment phase which means that we are no longer increasing our portfolio but only reinvesting bonds that mature. Up until October 2022, the Eurosystem purchased these bonds in accordance with the “market benchmark”. However, owing to the way the corporate bond market functions, this “market benchmark” has been criticised as leading to the purchase of a larger proportion of bonds from carbon-intensive firms.
Therefore, from October 2022, the ECB started to implement its decision to “tilt” CSPP reinvestments to increase the share of assets from issuers with better climate performance, rather than those with poorer climate performance. There are two main reasons for this decision.
First, the ECB considered this essential in order to effectively pursue its primary objective of maintaining price stability. Given that carbon-intensive issuers are more vulnerable to physical and transition risks arising from climate change, large holdings of bonds from such companies pose higher financial risks to the Eurosystem’s balance sheet, which has an impact on the implementation of its monetary policy.
Second, “tilting” the CSPP also serves the ECB’s secondary objective of supporting the general economic policies in the Union. “Tilting” its corporate bond reinvestments towards “greener” companies enables the ECB to align these reinvestments with the objectives set out in the Climate Law, which form part of those economic policies. This action was assessed as also being conducive, and not prejudicial, to price stability.
More generally, this measure ensures that the CSPP complies fully with the ECB’s obligations under Article 11 TFEU by integrating the objectives of the Climate Law into the definition and implementation of the ECB’s policies and activities.
This is one of the first steps in the ECB’s climate action plan, but the ECB is also looking into other ways to take climate-neutrality objectives into account in its monetary policy – for example, through the collateral that we ask when providing liquidity to banks.
For banking supervision, there are several dimensions that I will briefly discuss. Again, we do not directly apply the Climate Law. The Climate Law does not directly relate to our tasks as a banking supervisor nor does it relate to prudential supervision. Therefore the ECB does not impose an obligation on banks to take the necessary measures to contribute to the achievement of the objectives of the Climate Law. However, we cannot ignore it. Not only because we need to integrate environmental obligations into our policies due to Article 11 TFEU, but also since the law will have prudential implications. Therefore, the Climate Law and its consequences feature in our supervisory assessments, interactions with the banks and measures we take.
Why is that? Banks will be at the forefront of the energy and climate transition, whether they want to be or not. Their clients will face increasing hazards from climate change and environmental degradation as well as increasing regulation. Some clients will have to wind down their operations, others will be stuck with stranded assets. A mandatory energy label has been introduced for real estate[10], affecting the value of banks’ mortgage portfolios. Therefore, the ECB has identified exposure to climate-related and environmental risks as a key risk driver in the Single Supervisory Mechanism (SSM) Risk Map for the euro area banking system.[11] In order to guide banks regarding their risk management, the ECB has published supervisory expectations in its Guide on climate-related and environmental risks.[12] In addition, we have conducted a comprehensive review of banks’ practices related to strategy, governance and risk management on climate risks – the 2022 thematic review. We will continue to set expectations for banks to progressively manage risks on this front. These expectations are certainly not open ended. By the end of 2024, banks need to be in full compliance with all the supervisory expectations we set out in 2020.
Banks need to build their capabilities to withstand climate and environmental risks. We are happy that the Commission and the Council have acknowledged that this needs to have a foundation in prudential regulation as well. In the new banking package, the concept of “transition plans” is important. Under Article 76 of the proposed amendments to the Capital Requirements Directive (CRD VI)[13], a bank’s management board is required to monitor and address environmental risks arising in the short, medium and long term.[14] Banks have to make sure that their business model and strategy are not misaligned with the relevant Union policy objectives towards a sustainable economy and they need to manage potential risks from such misalignments.
Article 11 TFEU, the requirement to integrate environmental requirements into the policies and activities of the Union, plays a role in supervision. The ECB has a duty to integrate the Climate Law’s neutrality objectives into its supervisory policies and activities. However, we have some discretion as to how we do this. After all, the climate neutrality objective affects the ECB’s mandate in many respects and Article 11 TFEU does not prescribe how the ECB should integrate the environmental requirements. Do not expect us to act to regulate or enforce environmental policies. We will stick to our mandate. Our mandate is to keep under control the risks that banks and the financial system are facing, and in that capacity we have to look closely at the risks that are building up in the banking sector as a consequence of the climate crisis.
Lastly, I would like to draw your attention to the work of the Central Banks and Supervisors Network for Greening the Financial System (NGFS). In November 2021 the NGFS published an important report on climate-related litigation[15] which seeks to raise awareness about the growing source of litigation risk for public and private actors not convincingly supporting the climate change transition. Understanding the risks arising from climate-related litigation is clearly crucial for central banks and supervisory authorities, and the NGFS is continuing to monitor this field carefully. It plans to publish a further report next year with an update on the many developments since 2021.
I hope I am leaving you with the right impression. The ECB is not an environmental activist, but rather a prudent realist. It is our job to point out risks, whether they are macroeconomic, macroprudential, microprudential or related to litigation, and to ensure that the financial sector takes them duly into account.
Before I finish, let’s turn back to the brave fight of Vanuatu. You cannot blame Vanuatu’s president for seeking to defend the rights of countries most exposed to the ongoing climate and environmental crisis. Nor can we blame him for wanting to impose obligations on those most responsible for driving the crisis. Vanuatu’s mission is a stark example what the fight against the climate crisis is about. It underpins the task we have on our side. Europe has realistically no other choice than to deliver on the objectives of the Paris Agreement. If we waiver, the costs will only increase both in a moral and financial sense. Speaking as a European citizen, I would like us to be ready for the challenge ahead. As European central banker, supervisor and scholar of the law I will be even more forceful: our mandate requires us to be ready.
Compliments of the European Central Bank.

1. “The looming legal showdown on climate justice”, Financial Times, 10 November 2022.
2. Article 2(1)(a) of the Paris Agreement.
3. Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (“European Climate Law”) (OJ L 243, 9.7.2021, p. 1).
4. Recital 25 of the European Climate Law.
5. Article 5 of the European Climate Law.
6. Case C-11/00, Commission v ECB, EU:C:2003:395.
7. Article 284(3) TFEU and Article 15.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank.
7. Articles 127(1) and 130 TFEU.
8. “ECB presents action plan to include climate change considerations in its monetary policy strategy”, press release, ECB, 8 July 2021.
9. Currently under revision. See Proposal for a Directive of the European Parliament and of the Council on the energy performance of buildings (recast) COM/2021/802 final.
10. See “ECB Banking Supervision – Assessment of risks and vulnerabilities for 2021”, ECB, 2021.
11. See Guide on climate-related and environmental risks, ECB, November 2020.
12. Proposal for a Directive of the European Parliament and of the Council amending Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks, and amending Directive 2014/59/EU (COM/2021/663 final).
13. See also Articles 73 and 74 CRD VI.
14. “Climate-related litigation: Raising awareness about a growing source of risk”, NGFS, November 2021.

 
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Today, the EU Commission is proposing new EU-wide rules on packaging, to tackle this constantly growing source of waste and of consumer frustration. On average, each European generates almost 180 kg of packaging waste per year. Packaging is one of the main users of virgin materials as 40% of plastics and 50% of paper used in the EU is destined for packaging. Without action, the EU would see a further 19% increase in packaging waste by 2030, and for plastic packaging waste even a 46% increase.
The new rules aim to stop this trend. For consumers, they will ensure reusable packaging options, get rid of unnecessary packaging, limit overpackaging, and provide clear labels to support correct recycling. For the industry, they will create new business opportunities, especially for smaller companies, decrease the need for virgin materials, boosting Europe’s recycling capacity as well as making Europe less dependent on primary resources and external suppliers. They will put the packaging sector on track for climate neutrality by 2050.
The Commission also brings clarity to consumers and industry on biobased, compostable and biodegradable plastics: setting out for which applications  such plastics are truly environmentally beneficial and how they should be designed, disposed of and recycled.
The proposals are key building blocks of the European Green Deal’s Circular Economy Action Plan and its objective to make sustainable products the norm. They also respond to specific demands of Europeans as expressed at the Conference on the Future of Europe. 
Preventing packaging waste, boosting reuse and refill, and making all packaging recyclable by 2030
The proposed revision of the EU legislation on Packaging and Packaging Waste has three main objectives. First, to prevent the generation of packaging waste: reduce it in quantity, restrict unnecessary packaging and promote reusable and refillable packaging solutions. Second, to boost high quality (‘closed loop’) recycling: make all packaging on the EU market recyclable in an economically viable way by 2030. And finally, to reduce the need for primary natural resources and create a well-functioning market for secondary raw materials, increasing the use of recycled plastics in packaging through mandatory targets.

The headline target is to reduce packaging waste by 15% by 2040 per Member State per capita, compared to 2018. This would lead to an overall waste reduction in the EU of some 37% compared to a scenario without changing the legislation. It will happen through both reuse and recycling.

To foster reuse or refill of packaging, which has declined steeply in the last 20 years, companies will have to offer a certain percentage of their products to consumers in reusable or refillable packaging,  for example takeaway drinks and meals or e-commerce deliveries. There will also be some standardisation of packaging formats and clear labelling of reusable packaging.
To address clearly unnecessary packaging, certain forms of packaging will be banned, for example single-use packaging for food and beverages when consumed inside restaurants and cafes, single-use packaging for fruits and vegetables, miniature shampoo bottles and other miniature packaging in hotels.

Many measures aim to make packaging fully recyclable by 2030. This includes setting design criteria for packaging; creating mandatory deposit return systems for plastic bottles and aluminium cans; and making it clear which very limited types of packaging must be compostable so that consumers can throw these to biowaste.
There will also be mandatory rates of recycled content that producers have to include in new plastic packaging. This will help turn recycled plastic into a valuable raw material – as already shown by the example of PET bottles in the context of the Single-Use Plastics Directive.

The proposal will clear up confusion on which packaging belongs to which recycling bin. Every piece of packaging will carry a label showing what the packaging is made of and in which waste stream it should go. Waste collection containers will carry the same labels. The same symbols will be used everywhere in the EU.
By 2030, the proposed measures would bring greenhouse gas emissions from packaging down to 43 million tonnes compared to 66 million if the legislation is not changed – the reduction is about as much as the annual emissions of Croatia. Water use would be reduced by 1.1 million m3. The costs of environmental damage for the economy and society would be reduced by €6.4 billion relative to the baseline 2030.
Single-use packaging industries will have to invest into a transition, but the overall economic and job creation impact in the EU is positive. Boosting reuse alone is expected to lead to more than 600,000 jobs in the reuse sector by 2030, many of them at local small and medium sized companies. We expect much innovation in packaging solutions making it convenient to reduce, reuse and recycle. Measures are also expected to save money: each European could save almost €100 per year, if businesses translate savings to consumers. 
Clearing up confusion around biobased, biodegradable and compostable plastics
The use and production of biobased, biodegradable and compostable plastics has been steadily increasing. A number of conditions have to be met for these plastics to have positive environmental impacts, rather than exacerbating plastic pollution, climate change and biodiversity loss.
The Commission’s new  framework clarifies in what way these plastics can be part of a sustainable future.
Biomass used to produce biobased plastics must be sustainably sourced, with no harm to the environment and in respect of the ‘cascading use of biomass’ principle: producers should prioritise the use of organic waste and by-products as feedstock. In addition, to fight greenwashing and avoid misleading consumers, producers need to avoid generic claims on plastic products such as ‘bioplastics’ and ‘biobased’. When communicating on biobased content, producers should refer to the exact and measurable share of biobased plastic content in the product (for example: ‘the product contains 50% biobased plastic content’).
Biodegradable plastics must be approached with caution. They have their place in a sustainable future, but they need to be directed to specific applications where their environmental benefits and value for the circular economy are proven. Biodegradable plastics should by no means provide a licence to litter. Also, they must be labelled to show how long they will take to biodegrade, under which circumstances and in which environment. Products that are likely to be littered including those covered by the Single-Use Plastics Directive cannot be claimed to be or labelled as biodegradable.
Industrially compostable plastics should only be used when they have environmental benefits, they do not negatively affect the quality of the compost and when there is a proper biowaste collection and treatment system in place. Industrially compostable packaging will only be allowed for tea bags, filter coffee pods and pads, fruit and vegetable stickers, and very light plastic bags. The products must always specify that they are certified for industrial composting, in line with EU standards.
Next steps
The proposal on packaging and packaging waste will now be considered by the European Parliament and the Council, in the ordinary legislative procedure.
The policy framework on biobased, biodegradable and compostable plastics will guide future EU work on this issue, for example ecodesign requirements for sustainable products, funding programmes and international discussions. The Commission encourages citizens, public authorities and businesses to use this framework in their policy, investment or purchasing decisions.
Background
Goods need packaging to be protected and safely transported, but packaging and packaging waste have a significant impact on the environment and use of virgin materials. The amount of packaging waste is growing, frequently at a faster pace than GDP. Packaging waste increased by more than 20% over the last 10 years in the EU and is forecast to soar by another 19% until 2030, if no action is taken.
Biobased, biodegradable and compostable plastics are emerging in our daily lives as alternatives to conventional plastics. Citizens can find them for example in packaging, consumer goods and textiles as well as other sectors. Since they are called ‘bio’, consumers have the perception that they are necessarily good for the environment. However, this is only true to a certain extent.
Today’s package addressing these issues follows the first Circular Economy package of measures adopted in March 2022. It included the new Regulation on Ecodesign for Sustainable Products, the EU Strategy for Sustainable and Circular Textiles, and proposed new measures to empower consumers and enable them to play a fuller role in the green transition.
Compliments of the European Commission.
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Amid the widespread fallout in crypto markets following the collapse of a major crypto exchange, The ECB Blog takes a look at where we stand with Bitcoin.

The value of bitcoin peaked at USD 69,000 in November 2021 before falling to USD 17,000 by mid-June 2022. Since then, the value has fluctuated around USD 20,000. For bitcoin proponents, the seeming stabilization signals a breather on the way to new heights. More likely, however, it is an artificially induced last gasp before the road to irrelevance – and this was already foreseeable before FTX went bust and sent the bitcoin price to well below USD16,000.
Bitcoin is rarely used for legal transactions
Bitcoin was created to overcome the existing monetary and financial system. In 2008, the pseudonymous Satoshi Nakamoto published the concept. Since then, Bitcoin has been marketed as a global decentralised digital currency. However, Bitcoin’s conceptual design and technological shortcomings make it questionable as a means of payment: real Bitcoin transactions are cumbersome, slow and expensive. Bitcoin has never been used to any significant extent for legal real-world transactions.
In the mid-2010s, the hope that Bitcoin’s value would inevitably rise to ever new heights began to dominate the narrative. But Bitcoin is also not suitable as an investment. It does not generate cash flow (like real estate) or dividends (like equities), cannot be used productively (like commodities) or provide social benefits (like gold). The market valuation of Bitcoin is therefore based purely on speculation.
Speculative bubbles rely on new money flowing in. Bitcoin has also repeatedly benefited from waves of new investors. The manipulations by individual exchanges or stablecoin providers etc. during the first waves are well documented, but less so the stabilising factors after the supposed bursting of the bubble in spring.

Big Bitcoin investors have the strongest incentives to keep the euphoria going.

Big Bitcoin investors have the strongest incentives to keep the euphoria going. At the end of 2020, isolated companies began to promote Bitcoin at corporate expense. Some venture capital (VC) firms are also still investing heavily. Despite the ongoing “crypto winter”, VC investments in the crypto and blockchain industry totalled USD 17.9 billion as of mid-July.
Regulation can be misunderstood as approval
Large investors also fund lobbyists who push their case with lawmakers and regulators. In the US alone, the number of crypto lobbyists has almost tripled from 115 in 2018 to 320 in 2021. Their names sometimes read like a who’s who of US regulators.
But lobbying activities need a sounding board to have an impact. Indeed, lawmakers have sometimes facilitated the influx of funds by supporting the supposed merits of Bitcoin and offering regulation that gave the impression that crypto assets are just another asset class. Yet the risks of crypto assets are undisputed among regulators. In July, the Financial Stability Board (FSB) called for crypto assets and markets to be subject to effective regulation and supervision commensurate with the risks they pose – along the doctrine of “same risk, same regulation”.
However, legislation on crypto-assets has sometimes been slow to ratify in recent years – and implementation often lags behind. Moreover, the different jurisdictions are not proceeding at the same pace and with the same ambition. While the EU has agreed on a comprehensive regulatory package with the Markets in Crypto-Assets Regulation (MICA), Congress and the federal authorities in the US have not yet been able to agree on coherent rules.

The belief that space must be given to innovation at all costs stubbornly persists.

The current regulation of cryptocurrencies is partly shaped by misconceptions. The belief that space must be given to innovation at all costs stubbornly persists. Since Bitcoin is based on a new technology – DLT / Blockchain – it would have a high transformation potential. Firstly, these technologies have so far created limited value for society – no matter how great the expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it.
The supposed sanction of regulation has also tempted the conventional financial industry to make it easier for customers to access bitcoin. This concerns asset managers and payment service providers as well as insurers and banks. The entry of financial institutions suggests to small investors that investments in Bitcoin are sound.
It’s also worth noting that the Bitcoin system is an unprecedented polluter. First, it consumes energy on the scale of entire economies. Bitcoin mining is estimated to consume electricity per year comparable to Austria. Second, it produces mountains of hardware waste. One Bitcoin transaction consumes hardware comparable to the hardware of two smartphones. The entire Bitcoin system generates as much e-waste as the entire Netherlands. This inefficiency of the system is not a flaw but a feature. It is one of the peculiarities to guarantee the integrity of the completely decentralised system.
Promoting Bitcoin bears a reputational risk for banks
Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised. Similarly, the financial industry should be wary of the long-term damage of promoting Bitcoin investments – despite short-term profits they could make (even without their skin in the game). The negative impact on customer relations and the reputational damage to the entire industry could be enormous once Bitcoin investors will have made further losses.
Author:

Ulrich Bindseil, Director General, ECB

Jürgen Schaaf, Adviser, ECB

Compliments of the European Central Bank.
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“Check against delivery”
Thank you very much and thank you, Minister Sikela, for your excellent chairmanship and for the strong work of Czech Presidency. Even though if I know your work on the trade track may be over, you continue to work very intensively on energy track.
Our discussions today focussed on three core issues for EU trade policy: World Trade Organisation reform, EU-US trade relations and our ongoing trade support to Ukraine.
The EU is the strongest global champion of a functioning multilateral rulebook. We continue to pursue meaningful reform across three core functions of the WTO, namely dispute settlement, negotiation, and deliberation.
The MC12 Ministerial in June defied expectations by delivering positive, and in some cases, unprecedented results.
We are committed to putting a workable reform plan in place for the next ministerial. And in finding in a lasting fix for a functioning dispute settlement system. Our goal is to have this in place by 2024.
Of course, support from like-minded partners – especially the US – will be critical to achieve these objectives.
Another priority is to reinforce the sustainability and climate agenda by MC13.
We will mark an important milestone in January, when we launch a Trade Ministers Coalition for Climate, together with other WTO Members.
Finally, Ministers today completed the last step of our approval procedure of the Joint Statement Initiative on Services Domestic Regulation.
This agreement represents a milestone for the WTO.
It will help reduce costs of global services trade by more than USD 150 billion every year thanks to simplified regulations and procedures.
Let me turn next to the EU-US trade relationship. Today we especially focused on the upcoming Trade and Technology Council on the 5th of December.
The working groups are working hard to deliver a package of attractive results.
Our EU priorities for the TTC include a stronger focus on trade facilitating initiatives. And we want to see a greater focus on climate change. We plan to announce a “Transatlantic Initiative on Sustainable Trade”.
We want to ramp up cooperation in ways that boost trade and accelerate the green transition in a mutually beneficial way. For example, for the meeting in Maryland we have agreed to work on standards for Megawatt Charging Systems.
We of course also discussed the US Inflation Reduction Act.
Many of the green subsidies provided for in the Act discriminate against EU automotive, renewables, battery and energy-intensive industries. These are serious concerns for the EU, which I, and many of colleagues, have raised repeatedly with our US interlocutors.
These issues are now being discussed in a joint high-level task force.
These are no easy discussions but they must produce concrete solutions.
What we are asking for is fairness.
We want and expect European companies and exports to be treated in the same way in the US as American companies and exports are treated in Europe.
In the current geopolitical context, and keeping in mind our shared green targets, we should be building alliances in these important sectors – be that batteries, renewable energy, or recycling.
The last thing we should be doing is creating unnecessary distractions or potential new disputes.
I also would like to warn against the danger of conflating the Inflation Reduction Act with our broader relationship with the United States.
These are separate tracks.
The US has been a true ally to the EU in shoring up support to Ukraine, among many other issues.
I was in Kiev last Friday. The situation is dramatic, with continuous Russian attacks on vital infrastructure. People are being deprived of water, heat and electricity.
We need deepen and sharpen transatlantic unity in the face of these horrific attacks. And we need the US to maintain its support so that Ukraine can win this war.
Russia’s strategy is to use the cold of winter to bring the Ukrainian people to their knees.
And to sow division in Europe.
This must not happen.
This is why we need to deepen and sharpen transatlantic unity. And we need the US to maintain its support to Ukraine.
Trade Relationship with Ukraine was another item on the agenda.
We are discussing how trade can help Ukraine’s economy at this critical time.
We are working swiftly to integrate Ukraine into the EU’s roaming area.
This would bring immediate benefits to Ukrainian citizens.
We are also accelerating work on an agreement to allow Ukraine and the EU to export our industrial products freely to each other’s markets.
We continue to step up our work beyond our existing trade agreement, the DCFTA.
The Solidarity Lanes, for example, are a real achievement. Since May, they have allowed Ukraine to export more than 33 Mt of goods and to import more than 11 Mt of goods it needs.
We suspended all duties and trade defence measures on Ukraine earlier this year. This has resulted in a significant increase in Ukrainian exports to the EU.
And we intend to propose an extension of this arrangement in early 2023.
Finally, we are working on an ambitious review of the Priority Action Plan for 2023/2024, to accelerate the full implementation of the DCFTA.
In conclusion, we are deploying many trade related-support measures to Ukraine, and have more in the pipeline. A revised Priority Action Plan will be proposed in due time.
Compliments of the European Commission
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A new data gaps initiative will play an important role in addressing climate-related data deficit
A famous physicist once said: “When you can measure what you are speaking about, and express it in numbers, you know something about it”.
Nearly 140 years later, this maxim remains true and is particularly poignant for policymakers tasked with addressing climate mitigation and adaptation.
That’s because they face major information gaps that impede their ability to understand the impact of policies—from measures to incentivize cuts in emissions, to regulations that reduce physical risks and boost resilience to climate shocks. And without comprehensive and internationally comparable data to monitor progress, it’s impossible to know what works, and where course corrections are needed.
This underscores the importance of the support of G20 leaders for a new Data Gaps Initiative to make official statistics more detailed, and timely. It calls for better data to understand climate change, together with indicators that cover income and wealth, financial innovation and inclusion, access to private and administrative data, and data sharing. In short, official statistics need to be broader, more detailed, and timely.
The sector where change is needed the most is energy, the largest contributor to greenhouse gas emissions, accounting for around three-quarters of the total.
Economies must expand their renewable energy sources and curb fossil fuel use, but while there’s been a gradual shift in that direction, the pace is still not sufficient. And not only is there a lack of policy ambition in many cases, there also is a lack of comprehensive and internationally comparable data to monitor progress.
To accelerate cuts to emissions, policymakers need detailed statistics to monitor the path of the energy transition and assist them in devising effective mitigation measures that can deliver the fastest and least disruptive pathway toward net zero emissions.
At the same time, countries also need to monitor how mitigation and adaptation measures affect household incomes, consumption, and wealth. How, for example, will rising fossil fuel costs impact vulnerable households? And how should we prioritize investments to address new weather patterns and more frequent climate shocks?
Robust data are vital—because policies must be based on a clear understanding of the broad impacts of climate change, the green transition, and the associated physical, economic, and financial risks.
Encouragingly, the new Data Gaps Initiative argues for G20 economies to go beyond gross domestic product in their national statistics, by capturing a suite of climate indicators and distributional estimates of household income and wealth. This will help policymakers better weigh the distributional implications of policies.
In welcoming the new data gaps initiative, G20 Leaders asked the IMF to coordinate with the Financial Stability Board, the Inter-agency Group on Economic and Financial Statistics, and statistical authorities across the G20 to “begin work on filling these data gaps and report back on progress in the second half of 2023, noting that the targets are ambitious and delivery will need to take into account national statistical capacities, priorities, and country circumstances as well as avoiding overlap and duplication at the international level.”
The initiative will draw on the collective expertise of the international agencies that are coordinating the work as well as on work undertaken by groups such as the Network for Greening the Financial System to develop a common understanding of climate-related financial instruments.
This work is also closely linked to other IMF initiatives such as the IMF’s Climate Indicators Dashboard, which is another statistical initiative to help supply relevant climate-related data for economic analysis. It is also linked to the IMF joint project to provide implementation guidance on G20 high-level principles for taxonomies and other sustainable-finance alignment approaches.
G20 policymakers have recognized that better data is needed to inform the more complex challenges they face. The data gaps initiative will play a key role in addressing this.
— The latest announcements and data releases from the initiative are available here.
Compliments of the IMF.
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22/11/2022 – The OECD releases today the latest mutual agreement procedure (MAP) statistics covering 127 jurisdictions and practically all MAP cases worldwide. These statistics form part of the BEPS Action 14 Minimum Standard and the wider G20/OECD tax certainty agenda to improve the effectiveness and timeliness of tax-related dispute resolution mechanisms.
The 2021 MAP Statistics* show the following trends:

Significantly more MAP cases were closed in 2021. Approximately 13% more MAP cases were closed in 2021 than in 2020, with both transfer pricing cases (+22%) and other cases (almost +7%) closed being significantly more than in 2020. Competent authorities were able to close more cases in 2021 due to the greater use of virtual meetings, the prioritisation of simpler cases and greater collaboration to solve common issues collectively that could be applied across multiple MAP cases. Further, jurisdictions noted that increases in staff and the experience of these staff are now reflected in their ability to be able to resolve more cases.

Fewer new cases in 2021. The number of new MAP cases opened in 2021 decreased (almost -3%) (see trends since 2016) compared to 2020. This is attributed to a significant decrease in new transfer pricing cases being opened (almost -10.5%), while the number of other cases opened increased (almost +4%) compared to 2020.

Outcomes remain generally positive. Around 75% of the MAPs concluded in 2021 fully resolved the issue both for transfer pricing and other cases (similar to 76% for transfer pricing cases and 74% for other cases in 2020). Approximately 2% of MAP cases were closed with no agreement compared to 3% in 2020.

Cases still take a long time. On average, MAP cases closed in 2021 took 32 months for transfer pricing cases (35 months in 2020) and approximately 21 months for other cases (18.5 months in 2020). Some jurisdictions experienced delays, especially for more complex cases, and the COVID-19 crisis affected the quality of their communication with some treaty partners.

Competent authorities have continued to adapt. MAP continued to be available throughout the pandemic with several actions taken by competent authorities. Jurisdictions noted that, especially towards the end of 2021, there has been an increase in MAP engagement with treaty partners. Further, while jurisdictions welcomed the resumption of face-to-face meetings, the continued use of virtual meetings has allowed for opportunities to progress individual cases in between face-to-face meetings. This hybrid approach is a welcome practice that many jurisdictions continue to apply to expedite MAP resolutions and improve the efficiency and effectiveness of their MAP programmes.

This year’s MAP Awards*, given in recognition of efforts by competent authorities, saw the following winners: Spain and Ireland for the shortest time in closing transfer pricing cases and other cases respectively; Canada for the smallest proportion of pre-2016 cases in end inventory; and Ireland and New Zealand for the most effective caseload management. The award for the pairs of jurisdictions that dealt the most effectively with their joint caseload went to France-United States for transfer pricing cases and to Ireland-Germany for other cases. Finally, the award for the most improved jurisdiction, which also highlights the efforts taken by competent authorities to resolve MAP cases in 2021, went to Germany, which closed an additional 144 cases with positive outcomes (+41% increase) compared to 2020 with increases for both transfer pricing and other cases.
The 2021 MAP Statistics* and the 2021 MAP Awards* were presented during the fourth OECD Tax Certainty Day* where tax officials and stakeholders took stock of the tax certainty agenda and discussed ways to further improve dispute prevention and resolution. MAP Statistics play an important role in the monitoring of BEPS Action 14 Minimum Standard, providing an objective and global frame of reference, as well as a country-specific view, which together allow measurement of progress but also show where further work is needed.
Contact:

Grace Perez-Navarro, Director of the OECD Centre for Tax Policy and Administration | Grace.Perez-Navarro@oecd.org

Achim Pross, Acting Deputy Director of CTPA | Achim.Pross@oecd.org

Compliments of the OECD.
The post OECD releases new mutual agreement procedure statistics and country awards on the resolution of international tax disputes first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Blog post by Philip R. Lane, Member of the Executive Board of the ECB |

Identifying the medium-term inflation path in the current environment of high inflation, ongoing energy and pandemic-related shocks and the Russian invasion of Ukraine is a diagnostic challenge. In his ECB Blog post Philip R. Lane, Member of the ECB’s Executive Board, describes some of the key analytical issues involved.

Summary
This blog post describes the diagnostic challenges in identifying the medium-term inflation path in the current environment of high inflation, ongoing energy and pandemic-related shocks and the Russian invasion of Ukraine.[1] It interprets the surge in inflation since the middle of 2021 as the result of extraordinary relative price shocks that, in the presence of downward nominal price and wage rigidities, initially translate into an increase in the inflation rate. These relative price shocks reflect the scale and breadth of the energy shock and the pandemic- and war-related shocks. Under such circumstances, standard measures of contemporaneous underlying inflation may not accurately signal the persistent component of inflation, while forward-looking wage growth trackers may play a useful supplementary role in identifying the medium-term inflation dynamics. Long-term inflation expectations currently appear well anchored at the two per cent target, but a prolonged phase of above-target inflation poses a de-anchoring risk that is addressed by raising interest rates to the levels required to make sure that inflation returns to target in a timely manner.
Read the full blog post here.
Compliments of the European Central Bank.
The post ECB | Inflation Diagnostics first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.