Implementation of the international tax reform agreement to ensure multinational enterprises pay a fair share of tax wherever they operate is progressing, according to an OECD report delivered to G20 finance ministers and central bank governors ahead of their meeting in Indonesia later this week.
According to the OECD Secretary-General Tax Report, Members of the OECD/G20 Inclusive Framework on BEPS have concentrated on the practical implementation of the landmark agreement to reform international tax arrangements reached by over 135 countries and jurisdictions in October 2021.
The report includes a new Progress Report on Pillar One,  presenting  a comprehensive draft of the technical model rules to implement a new taxing right that will allow market jurisdictions to tax profits from some of the largest multinational enterprises (“Pillar One”). This report will now be subject to public consultation through to mid-August. The Inclusive Framework will then aim to finalise a new Multilateral Convention by mid-2023, for entry into force in 2024. This revised timeline, previously flagged by OECD Secretary-General Mathias Cormann and agreed by the Inclusive Framework is designed to allow greater engagement with citizens, business and parliamentary bodies which will ultimately have to ratify the agreement.
“We have made good progress towards implementation of a new taxing right under Pillar One of our international tax agreement. These are complex and very technical negotiations in relation to some new concepts that fundamentally reform international tax arrangements, to make them fairer and work better in an increasingly digitalised, globalised world economy,” OECD Secretary-General Mathias Cormann said. “We will keep working as quickly as possible to get this work finalised, but we will also take as much time as necessary to get the rules right. These rules will shape our international tax arrangements for decades to come. It is important to get them right,” he said.
Technical work under Pillar Two, which introduces a 15% global minimum corporate tax rate, is largely complete, with an Implementation Framework to be released later this year to facilitate implementation and co-ordination between tax administrations and taxpayers. All G7 countries, the European Union, a number of G20 countries and many other economies have now scheduled plans to introduce the global minimum tax rules.
In addition to the update on both Pillars, the Report updates progress in the implementation of the Transparency Agenda. The most recent data gathered by the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes shows that information on at least 111 million financial accounts worldwide was exchanged automatically between administrations around the globe in 2021, covering total assets of nearly EUR 11 trillion. Later this year, the OECD will finalise a new Crypto-Assets Reporting Framework and amendments to the OECD Common Reporting Standard to ensure that countries can continue to benefit from tax transparency standards.
To access the OECD’s Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors, visit www.oecd.org/tax/oecd-secretary-general-tax-report-g20-finance-ministers-indonesia-july-2022.pdf
Further information on the continuing international tax reform negotiations is available at https://oe.cd/bepsaction1.
Contacts:

Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration | Pascal.Saint-Amans@oecd.org

Lawrence Speer, OECD Media Office | Lawrence.Speer@oecd.org

Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.
The post OECD | International tax reform: Multilateral Convention to implement Pillar One on track for delivery by mid-2023 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by Vice Chair Lael Brainard at Bank of England Conference, London, United Kingdom on July 08, 2022 |

Recent volatility has exposed serious vulnerabilities in the crypto financial system.1 While touted as a fundamental break from traditional finance, the crypto financial system turns out to be susceptible to the same risks that are all too familiar from traditional finance, such as leverage, settlement, opacity, and maturity and liquidity transformation. As we work to future-proof our financial stability agenda, it is important to ensure the regulatory perimeter encompasses crypto finance.
Distinguishing Responsible Innovation from Regulatory Evasion
New technology often holds the promise of increasing competition in the financial system, reducing transaction costs and settlement times, and channeling investment to productive new uses. But early on, new products and platforms are often fraught with risks, including fraud and manipulation, and it is important and sometimes difficult to distinguish between hype and value. If past innovation cycles are any guide, in order for distributed ledgers, smart contracts, programmability, and digital assets to fulfill their potential to bring competition, efficiency, and speed, it will be essential to address the basic risks that beset all forms of finance. These risks include runs, fire sales, deleveraging, interconnectedness, and contagion, along with fraud, manipulation, and evasion. In addition, it is important to be on the lookout for the possibility of new forms of risks, since many of the technological innovations underpinning the crypto ecosystem are relatively novel.
Far from stifling innovation, strong regulatory guardrails will help enable investors and developers to build a resilient digital native financial infrastructure. Strong regulatory guardrails will help banks, payments providers, and financial technology companies (FinTechs) improve the customer experience, make settlement faster, reduce costs, and allow for rapid product improvement and customization.
We are closely monitoring recent events where risks in the system have crystallized and many crypto investors have suffered losses. Despite significant investor losses, the crypto financial system does not yet appear to be so large or so interconnected with the traditional financial system as to pose a systemic risk. So this is the right time to ensure that like risks are subject to like regulatory outcomes and like disclosure so as to help investors distinguish between genuine, responsible innovation and the false allure of seemingly easy returns that obscures significant risk. This is the right time to establish which crypto activities are permissible for regulated entities and under what constraints so that spillovers to the core financial system remain well contained.
Insights from Recent Turbulence
Several important insights have emerged from the recent turbulence in the crypto-finance ecosystem. First, volatility in financial markets has provided important information about crypto’s performance as an asset class. It was already clear that crypto-assets are volatile, and we continue to see wild swings in crypto-asset values. The price of Bitcoin has dropped by as much as 75 percent from its all-time high over the past seven months, and it has declined almost 60 percent in the three months from April through June. Most other prominent crypto-assets have experienced even steeper declines over the same period. Contrary to claims that crypto-assets are a hedge to inflation or an uncorrelated asset class, crypto-assets have plummeted in value and have proven to be highly correlated with riskier equities and with risk appetite more generally.2
Second, the Terra crash reminds us how quickly an asset that purports to maintain a stable value relative to fiat currency can become subject to a run. The collapse of Terra and the previous failures of several other unbacked algorithmic stablecoins are reminiscent of classic runs throughout history. New technology and financial engineering cannot by themselves convert risky assets into safe ones.
Third, crypto platforms are highly vulnerable to deleveraging, fire sales, and contagion—risks that are well known from traditional finance—as illustrated by the freeze on withdrawals at some crypto lending platforms and exchanges and the bankruptcy of a prominent crypto hedge fund. Some retail investors have found their accounts frozen and suffered large losses. Large crypto players that used leverage to boost returns are scrambling to monetize their holdings, missing margin calls, and facing possible insolvency. As their distress intensifies, it has become clear that the crypto ecosystem is tightly interconnected, as many smaller traders, lenders, and DeFi (decentralized finance) protocols have concentrated exposures to these big players.
Finally, we have seen how decentralized lending, which relies on overcollateralization to substitute for intermediation, can serve as a stress amplifier by creating waves of liquidations as prices fall.3
Same Risk, Same Regulatory Outcome
The recent turbulence and losses among retail investors in crypto highlight the urgent need to ensure compliance with existing regulations and to fill any gaps where regulations or enforcement may need to be tailored—for instance, for decentralized protocols and platforms. As we consider how to address the potential future financial stability risks of the evolving crypto financial system, it is important to start with strong basic regulatory foundations. A good macroprudential framework builds on a solid foundation of microprudential regulation. Future financial resilience will be greatly enhanced if we ensure the regulatory perimeter encompasses the crypto financial system and reflects the principle of same risk, same disclosure, same regulatory outcome. By extending the perimeter and applying like regulatory outcomes and like transparency to like risks, it will enable regulators to more effectively address risks within crypto markets and potential risks posed by crypto markets to the broader financial system. Strong guardrails for safety and soundness, market integrity, and investor and consumer protection will help ensure that new digital finance products, platforms, and activities are based on genuine economic value and not on regulatory evasion, which ultimately leaves investors more exposed than they may appreciate.
Due to the cross-sectoral and cross-border scope of crypto platforms, exchanges, and activities, it is important that regulators work together domestically and internationally to maintain a stable financial system and address regulatory evasion. The same-risk-same-regulatory-outcome principle guides the Financial Stability Board’s work on stablecoins, crypto-assets, and DeFi; the Basel consultation on the prudential treatment of crypto-assets; the work by the International Organization of Securities Commissions’ FinTech network; the work by federal bank regulatory agencies on the appropriate treatment of crypto activities at U.S. banks; and a host of other international and domestic work.4
In implementing a same-risk-same-regulatory-outcome principle, we should start by ensuring basic protections are in place for consumers and investors. Retail users should be protected against exploitation, undisclosed conflicts of interest, and market manipulation—risks to which they are particularly vulnerable, according to a host of research.5 If investors lack these basic protections, these markets will be vulnerable to runs.
Second, since trading platforms play a critical role in crypto-asset markets, it is important to address noncompliance and any gaps that may exist. We have seen crypto-trading platforms and crypto-lending firms not only engage in activities similar to those in traditional finance without comparable regulatory compliance, but also combine activities that are required to be separated in traditional financial markets. For example, some platforms combine market infrastructure and client facilitation with risk-taking businesses like asset creation, proprietary trading, venture capital, and lending.
Third, all financial institutions, whether in traditional finance or crypto finance, must comply with the rules designed to combat money laundering and financing of terrorism and to support economic sanctions. Platforms and exchanges should be designed in a manner that facilitates and supports compliance with these laws. The permissionless exchange of assets and tools that obscure the source of funds not only facilitate evasion, but also increase the risk of theft, hacks, and ransom attacks. These risks are particularly prominent in decentralized exchanges that are designed to avoid the use of intermediaries responsible for know-your-customer identification and that may require adaptations to ensure compliance at this most foundational layer.6
Finally, it is important to address any regulatory gaps and to adapt existing approaches to novel technologies. While regulatory frameworks clearly apply to DeFi activities no less than to centralized crypto activities and traditional finance, DeFi protocols may present novel challenges that may require adapting existing approaches.7 The peer-to-peer nature of these activities, their automated nature, the immutability of code once deployed to the blockchain, the exercise of governance functions through tokens in decentralized autonomous organizations, the absence of validated identities, and the dispersion or obfuscation of control may make it challenging to hold intermediaries accountable. It is not yet clear that digital native approaches, such as building in automated incentives for undertaking governance responsibilities, are adequate alternatives.
Connections to the Core Financial Institutions
There are two specific areas that merit heightened attention because of heightened risks of spillovers to the core financial system: bank involvement in crypto activities and stablecoins. To date, crypto has not become sufficiently interconnected with the core financial system to pose broad systemic risk. But it is likely regulators will continue to face calls for supervised banking institutions to play a role in these markets.
Bank regulators will need to weigh competing considerations in assessing bank involvement in crypto activities ranging from custody to issuance to customer facilitation. Bank involvement provides an interface where regulators have strong sightlines and can help ensure strong protections. Similarly, regulators are drawn to approaches that effectively subject the crypto intermediaries that resemble complex bank organizations to bank-like regulation. But bringing risks from crypto into the heart of the financial system without the appropriate guardrails could increase the potential for spillovers and has uncertain implications for the stability of the system. It is important for banks to engage with beneficial innovation and upgrade capabilities in digital finance, but until there is a strong regulatory framework for crypto finance, bank involvement might further entrench a riskier and less compliant ecosystem.
Private Digital Currencies and Central Bank Digital Currencies
Stablecoins represent a second area with a heightened risk of spillovers. Currently, stablecoins are positioned as the digital native asset that bridges from the crypto financial system to fiat. This role is important because fiat currency is referenced as the unit of account for the crypto financial system.8 Stablecoins are currently the settlement asset of choice on and across crypto platforms, often serving as collateral for lending and trading activity. As highlighted by large recent outflows from the largest stablecoin, stablecoins pegged to fiat currency are highly vulnerable to runs. For these reasons, it is vital that stablecoins that purport to be redeemable at par in fiat currency on demand are subject to the types of prudential regulation that limit the risk of runs and payment system vulnerabilities that such private monies have exhibited historically.
Well-regulated stablecoins might bring additional competition to payments, but they introduce other risks. There is a risk of fragmentation of stablecoin networks into walled gardens. Conversely, there is a risk that a single dominant stablecoin might emerge, given the winner-takes-all dynamics in such activities. Indeed, the market is currently highly concentrated among three dominant stablecoins, and it risks becoming even more concentrated in the future. The top three stablecoins account for almost 90 percent of transactions, and the top two of these account for 80 percent of market capitalization.9
Given the foundational role of fiat currency, there may be an advantage for future financial stability to having a digital native form of safe central bank money—a central bank digital currency. A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system.10 A settlement layer with a digital native central bank money could, for instance, facilitate interoperability among well-regulated stablecoins designed for a variety of use cases and enable private-sector provision of decentralized, customized, and automated financial products. This development would be a natural evolution of the complementarity between the public and private sectors in payments, ensuring strong public trust in the one-for-one redeemability of commercial bank money and stablecoins for safe central bank money.11
Building in Risk Management and Compliance
Crypto and fintech have introduced competition and put the focus on how innovation can help increase inclusion and address other vexing problems in finance today. Slow and costly payments particularly affect lower-income households with precarious cash flows who rely on remittances or miss bills waiting on paychecks. Many hard-working individuals cannot obtain credit to start businesses or to respond to an emergency.
But while innovation and competition can reduce costs in finance, some costs are necessary to keep the system safe.12 Intermediaries earn revenues in exchange for safely providing important services. Someone must bear the costs of evaluating risk, maintaining resources to support those risks through good times and bad, complying with laws that prevent crime and terrorism, and serving less sophisticated customers fairly and without exploitation. In the current crypto ecosystem, often no one is bearing these costs. So when a service appears cheaper or more efficient, it is important to understand whether this benefit is due to genuine innovation or regulatory noncompliance.
So as these activities evolve, it is worth considering whether there are new ways to achieve regulatory objectives in the context of new technology. Distributed ledgers, smart contracts, and digital identities may allow new forms of risk management that shift the distribution of costs. Perhaps in a more decentralized financial system, new approaches can be designed to make protocol developers and transaction validators accountable for ensuring financial products are safe and compliant.
Conclusion
Innovation has the potential to make financial services faster, cheaper, and more inclusive and to do so in ways that are native to the digital ecosystem. Enabling responsible innovation to flourish will require that the regulatory perimeter encompass the crypto financial system according to the principle of like risk, like regulatory outcome, and that novel risks associated with the new technologies be appropriately addressed. It is important that the foundations for sound regulation of the crypto financial system be established now before the crypto ecosystem becomes so large or interconnected that it might pose risks to the stability of the broader financial system.
Compliments of the U.S. Federal Reserve.

1. I am grateful to Joseph Cox and Molly Mahar of the Federal Reserve Board for their assistance in preparing this text. The views expressed here address broad principles from a financial stability perspective across the financial system and not specific regulations. These views are my own and do not necessarily reflect those of the Federal Reserve Board or the Federal Open Market Committee. Return to text

2. See, for example, the discussion in section 2 of Financial Stability Board (2022), Assessment of Risks to Financial Stability from Crypto-assets (PDF) (Basel, Switzerland: FSB, February). Return to text

3. Most decentralized lending protocols require loans to remain overcollateralized, with loans that fall below specific thresholds subject to automatic liquidations. These liquidations can have a persistent effect on asset prices, which often triggers further liquidations. See preliminary research in Alfred Lehar and Christine A. Parlour (2022), “Systemic Fragility in Decentralized Markets (PDF),” unpublished paper, June 13. Return to text

4. See, for example, Financial Stability Board (2022), Assessment of Risks to Financial Stability from Crypto-assets (Basel, Switzerland: FSB, February); Financial Stability Board (2020), Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements (PDF) (Basel, Switzerland: FSB, October); Basel Committee on Banking Supervision (2022), “Consultative Document: Second Consultation on the Prudential Treatment of Cryptoasset Exposures (PDF)” (Basel, Switzerland: Bank for International Settlements, June); and Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency (2021), “Joint Statement on Crypto-Asset Policy Sprint Initiative and Next Steps,” joint press release, November 23. Return to text

5. See, for example, Philip Daian, Steven Goldfeder, Tyler Kell, Yunqi Li, Xueyuan Zhao, Iddo Bentov, Lorenz Breidenbach, and Ari Juels (2019), “Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges (PDF),” unpublished paper, Cornell University, arXiv, April; Raphael Auer, Jon Frost, and Jose María Vidal Pastor (2022), “Miners as Intermediaries: Extractable Value and Market Manipulation in Crypto and DeFi (PDF),” BIS Bulletin 58 (Basel, Switzerland: Bank for International Settlements, June); Paul Barnes (2018), “Crypto Currency and Its Susceptibility to Speculative Bubbles Manipulation, Scams and Fraud,” Journal of Advanced Studies in Finance, vol. 9 (Winter), pp. 60–77; and Felix Eigelshoven, André Ullrich, and Douglas Parry (2021), “Cryptocurrency Market Manipulation—A Systematic Literature Review,” in ICIS 2021 Proceedings on “Building Sustainability and Resilience with IS: A Call for Action” (Austin, Tex.: International Conference on Information Systems, Dec. 12–15). Return to text

6. The Russian invasion of Ukraine has raised questions about the use of crypto-asset markets for sanctions evasion. See, for example, comments by Carol House, the director of cybersecurity for the National Security Council: “The scale that the Russian state would need to successfully circumvent all U.S. and partners’ financial sanctions would almost certainly render cryptocurrency as an ineffective primary tool for the state” (as quoted in Hannah Lang (2022), “U.S. Lawmakers Push Treasury to Ensure Russia Cannot Use Cryptocurrency to Avoid Sanctions,” Reuters, March 2, para. 7). Return to text

7. See Board of the International Organization of Securities Commissions (2022), IOSCO Decentralized Finance Report: Public Report (PDF) (Madrid: OICV-IOSCO, March). Return to text

8. See Bank for International Settlements (2022), “The Future Monetary System,” in Annual Economic Report 2022 (Basel, Switzerland: BIS, June). Return to text

9. See The Block (2022), “Share of Trade Volume by Pair Denomination,” data as of June from CryptoCompare, https://www.theblock.co/data/crypto-markets/spot/share-of-trade-volume-by-pair-denomination; Martin Young (2022), “Circle‘s USDC Stablecoin Gobbles Tether‘s Market Share with 50B Milestone,” Cointelegraph, February 1, https://cointelegraph.com/news/circle-s-usdc-stablecoin-gobbles-tether-s-market-share-with-50b-milestone; and Brian Newar (2022), “USDC’s ‘Real Volume’ Flips Tether on Ethereum as Total Supply Hits 55.9B,” Cointelegraph, June 22, https://cointelegraph.com/news/usdc-s-real-volume-flips-tether-on-ethereum-as-total-supply-hits-55-9b. Return to text

10. See Lael Brainard (2022), “Digital Assets and the Future of Finance: Examining the Benefits and Risks of a U.S. Central Bank Digital Currency,” statement before the Committee on Financial Services, U.S. House of Representatives, May 26. Return to text

11. With respect to the United States, no decision has been made about whether or not a central bank digital currency will be issued. Return to text

12. See Igor Makarov and Antoinette Schoar (2022), “Cryptocurrencies and Decentralized Finance (DeFi) (PDF),” Brookings Papers on Economic Activity, BPEA Conference Draft, March 24–25. Return to text

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Russia’s invasion of Ukraine highlights the crisis and opportunity of the energy transition
It is hard to look at a crisis like Russia’s invasion of Ukraine and see a moment of opportunity. We—to say nothing of Ukrainians—are still very much in a crisis, and a compounding one at that, with potential long-lasting economic and political consequences.
It is similarly clear that talk of “opportunity” cuts both ways. Vested interests are often the ones that benefit the most from swift political action, further cementing the status quo. Witness many lawmakers’ tendency to respond to high energy prices with misguided attempts to lower them directly, dampening any incentives to cut fossil fuel use that high prices might provide.
Affordable energy
One big difference between the present energy price surge and previous such episodes is the availability of cheap and accessible alternatives to the current, largely fossil-fueled, infrastructure. The International Energy Agency was right to declare in 2020 that “for projects with low-cost financing that tap high-quality resources, solar [photovoltaic (PV)] is now the cheapest source of electricity in history.” That is still the case.
Solar PV prices have risen in the past two years, leading to “greenflation” entering the financial lexicon. Yet “fossilflation” dominates the picture. Prices for fossil-based power sources have risen by more than the relatively small price increases in solar PV, in turn further lowering relative solar prices per kilowatt of capacity and actual electricity produced. Overall, systems prices have come down dramatically over the years, declining by a factor of two within a decade, three within four. And solar PV, of course, is not alone.
Crucially, batteries and electric vehicle (EV) prices have similarly declined fast, leading to rapid increases in adoption. In 2016, the BP Energy Outlook projected that the world would surpass 70 million plug-in vehicles globally by 2035. That number now looks achievable for 2025, 10 years earlier than expected on a 20-year time horizon. Of course, any such numbers show how far there is still to go. Global PV market share stands at about 3 percent; for EVs it’s not yet 2 percent. Even 70 million EVs would be less than 6 percent of today’s global vehicle fleet of some 1.2 billion cars.

“No serious analysis published before Vladimir Putin’s invasion of Ukraine even imagined that Russia would cut off gas deliveries to the European Union altogether.”

Neither PV nor EVs will make much of a difference in addressing the challenges posed by the current fossil-fueled war. Short-term measures to disentangle EU dependence on Russian oil and gas ought to focus on decreasing demand and finding alternatives to Russian supplies. That implies increasing the production of both oil and gas elsewhere. It also means short-term measures, such as avoiding the German nuclear exit scheduled for December 2022, and some other hard trade-offs—a short-term increase in European coal power production, for example.  (Ironically, a good portion of coal used in the European Union also comes from Russia, compounding the challenge.)
Assessing risk
Russia’s unprovoked war, and the world’s reaction to it, also lays bare another, much more fundamental, issue: economic and broader energy policy analyses’ inherent limited ability to inform policymakers’ decisions in tackling crises such as those we now face, especially crises that overlap.
To begin with, no serious analysis published before Russian President Vladimir Putin’s invasion of Ukraine even imagined that Russia would cut off gas deliveries to the European Union altogether. A deliberate EU break from Russian gas imports was considered all but impossible. For example, the European Network of Transmission System Operators for Gas (ENTSOG), charged with stress-testing the European gas network, never even considered the possibility. ENTSOG’s latest stress test imagines what might happen if no Russian gas flowed through Belarus or none through Ukraine. No Russian gas at all was not part of the set of modeled scenarios. The very idea was apparently unimaginable, or so radical that it belied any stress test. The stress on the system would simply be too large.
Economic models at the time were similarly limited. A widely cited analysis by European Central Bank economists has the promising title “Natural Gas Dependence and Risks to Euro Area Activity.” Its headline conclusion: a 10 percent gas supply shock would cut euro area GDP by 0.7 percent. The hardest-hit sector? Electricity, gas, steam, and air-conditioning supply, the sector most dependent on gas as a direct input. The sector’s output, thus, would fall by almost 10 percent due to a 10 percent gas supply shock. That conclusion seems reasonable at first blush. The methodology, relying on standard input-output methods, is well-established. The problem is the static nature of the analysis and the resulting status quo bias.
Benefits and costs
Heat pumps represent one of the most promising low-carbon energy technologies. They replace oil and gas furnaces and do so much more efficiently. In fact, heat pumps are so efficient that even if all electricity comes from natural gas, the resulting emissions are still lower than if natural gas were burned directly in a home’s gas furnace. Heat pumps are also essentially air-conditioners run in reverse. Why then would the air-conditioning sector suffer in a scenario with less gas? Demand for heat pumps would skyrocket, something apparent all over Europe right now, with a clogged supply chain adding to inflation pressure.
That does not mean that cutting off Russian gas somehow portends an economic boom. To the contrary, there are real costs. Change is hard. But costs also imply opportunity. McKinsey’s report on the net-zero transition has the promising subtitle “What It Would Cost, What It Could Bring.” In short, its analysis shows costs of about $25 trillion over 30 years to convert the world economy from its current path to one that achieves net-zero carbon emissions by midcentury.

“Politicians are often more interested in cementing the status quo than in bringing about necessary changes.”

Establishing who should pay for these $25 trillion investments will engender some difficult political fights. But there will indeed be plenty of winners from these additional investments, including in purely economic terms. Measured from a societal perspective, these investments pay for themselves many times over, given that fossil energy use costs more in external damages than it adds value to GDP.
Policy, thus, is key. The most important aspect: a true net-zero transition implies both the rapid deployment of new low-carbon technologies and more significant systemic changes. The war in Ukraine has already revealed lots of missed opportunities on the policy front. Politicians are often more interested in cementing the status quo than in bringing about necessary changes, for the same reason that Niccolò Machiavelli wrote five centuries ago: “The innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”
Authors:

GERNOT WAGNER is currently visiting associate professor at Columbia Business School, on leave from New York University, where he teaches climate economics and policy

Compliments of the IMF.
Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.
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The European Commission welcomes the decision by Canada to return a natural gas pipeline turbine to Germany after its repair, for use in the Nord Stream 1 pipeline. With the return of this part, one of the excuses being used by Russia for reduced gas flows has been removed. The Commission has been in close contact with both Germany and Canada on this issue, and with Siemens, to ensure that we were well informed of the situation.
The Commission continues to work closely with its international partners, including Canada and the United States, to ensure the energy security of Europe for the coming winter. We are pursuing the target of filling 80% of Europe’s gas storage by 1 November in line with the new Regulation which was proposed by the Commission in March, and agreed by the European Parliament and Member States in June. We also continue the work under our REPowerEU Plan to diversify our energy supplies, accelerate deployment of renewable energy sources, and to strengthen our energy efficiency and energy savings efforts.
Compliments of the European Commission.
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Among the most sensitive categories of data collected by connected devices are a person’s precise location and information about their health. Smartphones, connected cars, wearable fitness trackers, “smart home” products, and even the browser you’re reading this on are capable of directly observing or deriving sensitive information about users. Standing alone, these data points may pose an incalculable risk to personal privacy. Now consider the unprecedented intrusion when these connected devices and technology companies collect that data combine it, and sell or monetize it. This isn’t the stuff of dystopian fiction. It’s a question consumers are asking right now.
The conversation about technology tends to focus on benefits. But there is a behind-the-scenes irony that needs to be examined in the open: the extent to which highly personal information that people choose not to disclose even to family, friends, or colleagues is actually shared with complete strangers. These strangers participate in the often shadowy ad tech and data broker ecosystem where companies have a profit motive to share data at an unprecedented scale and granularity.
When consumers use their connected devices – and sometimes even when they don’t – these devices may be regularly pinging cell towers, interacting with WiFi networks, capturing GPS signals, and otherwise creating a comprehensive record of their whereabouts. This location data can reveal a lot about people, including where we work, sleep, socialize, worship, and seek medical treatment. While many consumers may happily offer their location data in exchange for real-time crowd-sourced advice on the fastest route home, they likely think differently about having their thinly-disguised online identity associated with the frequency of their visits to a therapist or cancer doctor.
Beyond location information generated automatically by consumers’ connected devices, millions of people also actively generate their own sensitive data, including by using apps to test their blood sugar, record their sleep patterns, monitor their blood pressure, or track their fitness, or sharing face and other biometric information to use app or device features. The potent combination of location data and user-generated health data creates a new frontier of potential harms to consumers.
The marketplace for this information is opaque and once a company has collected it, consumers often have no idea who has it or what’s being done with it. After it’s collected from a consumer, data enters a vast and intricate sales floor frequented by numerous buyers, sellers, and sharers. There are the mobile operating systems that provide the mechanisms for collecting the data. Then there are app publishers and software development kit (SDK) developers that embed tools in mobile apps to collect location information and provide the data to third parties.
The next stop in the murky marketplace may be data aggregators and brokers – companies that collect information from multiple sources and then sell access to it (or analyses derived from it) to marketers, researchers, and even government agencies. These companies often build profiles about consumers and draw inferences about them based on the places they have visited. The amount of information they collect is staggering. For example, in a 2014 study, the FTC reported that data brokers use data to make sensitive inferences, such as categorizing a consumer as “Expectant Parent.” According to the report, one data broker bragged to shareholders in a 2013 annual report that it had 3,000 points of data for nearly every consumer in the United States. In many instances, data aggregators and brokers have no interaction with consumers or the apps they’re using. So people are left in the dark about how companies are profiting from their personal information.
Now let’s consider a particularly sensitive subset at the intersection of location and health: information related to personal reproductive matters – for example, products that track women’s periods, monitor their fertility, oversee their contraceptive use, or even target women considering abortion.
The concerns many have expressed about the risk of misuse are more than just theoretical. In 2017, for example, the Massachusetts Attorney General reached a settlement with marketing company Copley Advertising, LLC, and its principal for using location technology to identify when people crossed a secret digital “fence” near a clinic offering abortion services. Based on that data, the company sent targeted ads to their phones with links to websites with information about alternatives to abortion. The Massachusetts AG asserted that the practice violated state consumer protection law.
And just recently, the FTC reached a settlement with Flo Health, alleging the company shared with third parties – including Google and Facebook – sensitive health information about women collected from its period and fertility-tracking app, despite promising to keep this information private.
The misuse of mobile location and health information – including reproductive health data – exposes consumers to significant harm. Criminals can use location or health data to facilitate phishing scams or commit identity theft. Stalkers and other criminals can use location or health data to inflict physical and emotional injury. The exposure of health information and medical conditions, especially data related to sexual activity or reproductive health, may subject people to discrimination, stigma, mental anguish, or other serious harms. Those are just a few of the potential injuries – harms that are exacerbated by the exploitation of information gleaned through commercial surveillance.
The Commission is committed to using the full scope of its legal authorities to protect consumers’ privacy. We will vigorously enforce the law if we uncover illegal conduct that exploits Americans’ location, health, or other sensitive data. The FTC’s past enforcement actions provide a roadmap for firms seeking to comply with the law.
What should companies consider when thinking about the collection of confidential consumer information, including location and health data?
Sensitive data is protected by numerous federal and state laws. There are numerous state and federal laws that govern the collection, use, and sharing of sensitive consumer data, including many enforced by the Commission. The FTC has brought hundreds of cases to protect the security and privacy of consumers’ personal information, some of which have included substantial civil penalties. In addition to Section 5 of the FTC Act, which broadly prohibits unfair and deceptive trade practices, the Commission also enforces the Safeguards Rule, the Health Breach Notification Rule, and the Children’s Online Privacy Protection Rule.
Claims that data is “anonymous” or “has been anonymized” are often deceptive. Companies may try to placate consumers’ privacy concerns by claiming they anonymize or aggregate data. Firms making claims about anonymization should be on guard that these claims can be a deceptive trade practice and violate the FTC Act when untrue. Significant research has shown that “anonymized” data can often be re-identified, especially in the context of location data. One set of researchers demonstrated that, in some instances, it was possible to uniquely identify 95% of a dataset of 1.5 million individuals using four location points with timestamps. Companies that make false claims about anonymization can expect to hear from the FTC.
The FTC cracks down on companies that misuse consumers’ data. As recent cases have shown, the FTC does not tolerate companies that over-collect, indefinitely retain, or misuse consumer data. Ad exchange OpenX recently paid $2 million for collecting children’s location data without parental consent. The Commission also took action against Kurbo/Weight Watchers for, among other things, indefinitely retaining sensitive consumer data. The settlement requires the company to pay a $1.5 million fine for violating COPPA, delete all illegally collected data, and also delete any work product algorithms created using that data. Just a few weeks ago, the Commission entered a final order requiring CafePress to pay redress and minimize its data collection because, according to the Commission’s complaint, it improperly collected and retained consumer data, and failed to respect consumers’ deletion requests, among other things.
Compliments of the U.S. Federal Trade Commission.
The post Location, health, and other sensitive information: FTC committed to fully enforcing the law against illegal use and sharing of highly sensitive data first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Crypto-assets and markets must be subject to effective regulation and oversight commensurate to the risks they pose, both at the domestic and international level.
In February 2022, the FSB published a risk assessment on crypto-assets, which outlined its concerns over the rapid growth in crypto-assets. The recent turmoil in crypto-asset markets highlights their intrinsic volatility, structural vulnerabilities and increasing interconnectedness with the traditional financial system. In addition to imposing potentially large losses on investors and threatening market confidence arising from crystallisation of conduct risks, the failure of a market player can also quickly transmit risks to other parts of the crypto-asset ecosystem. It may have spill-over effects on important parts of traditional finance such as short-term funding markets. An effective regulatory framework must ensure that crypto-asset activities posing risks similar to traditional financial activities are subject to the same regulatory outcomes, while taking account of novel features of crypto-assets and harnessing their benefits.
The statement notes that crypto-assets and markets must be subject to effective regulation and oversight commensurate to the risks they pose, both at the domestic and international level. It calls for adherence by so-called stablecoins and crypto-assets to relevant existing requirements where regulations apply to address the risks these assets pose. It also calls for crypto-asset service providers to ensure compliance with existing legal obligations in the jurisdictions in which they operate at all times.
This statement outlines the work the FSB is taking forward, in collaboration with standard-setting bodies, including the Financial Action Task Force, on the regulation and supervision of ‘unbacked’ crypto-assets and ‘stablecoins’, as well as on analysing the financial stability implications of Decentralised Finance. This work should provide a solid basis for a consistent and comprehensive regulation of crypto assets.
Compliments of the Financial Stability Board.
The post FSB Statement on International Regulation and Supervision of Crypto-asset Activities first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

How much do people trust their government? And to what degree do a government’s competence and values influence trust in public institutions? To measure and better understand what drives people’s trust in public institutions, the OECD conducted the first cross-national survey of more than 50,000 people in 22 countries*, aimed at helping governments better understand where citizen confidence is wavering, where it remains solid and what needs to be done to close the gap.
A report, Building Trust to Reinforce Democracy: Main Findings of the 2021 OECD Survey on Drivers of Trust in Public Institutions, analysing the survey findings will be released on Wednesday 13 July at 11.00 CET.
A webinar to discuss the findings will take place at 14.00 CET the same day. The webinar is open to media – register here.
Journalists can request a copy of the report under embargo, thereby undertaking to respect the OECD’s embargo procedures, by emailing embargo@oecd.org. Embargoed copies will be sent by email on Tuesday 12 July.
*Participating countries were: Australia, Austria, Belgium, Canada, Colombia, Denmark, Estonia, Finland, France, Iceland, Ireland, Japan, Korea, Latvia, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Portugal, Sweden and the United Kingdom.
Contacts:

Spencer Wilson, OECD Media Office | spencer.wilson@oecd.org
The OECD Media Office | news.contact@oecd.org
To get advance notification of other OECD reports and events, journalists can complete this short form.

Compliments of the OECD.
The post Media Advisory – OECD launches first survey on Drivers of Trust in Public Institutions on Wednesday 13 July first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The ECB is taking action to reduce the carbon footprint in its portfolio and push banks to better manage climate and environmental risks. Within our mandate, we are incorporating climate change considerations into our monetary policy and banking supervision.
Climate change matters for central banks. It is not only an existential threat to civilisation, it also entails severe risks for the economy. Floods, storms and wildfires have become more frequent. Extreme weather events damage infrastructure, destroy harvests and raise food prices.
To secure a liveable future, the European Union is committed to achieving climate neutrality by 2050. This will require enormous investment and innovation, and it has implications for inflation during the transition phase. It also makes parts of the capital stock redundant and creates financial risks.
So the ECB cannot ignore climate change. It has direct effects on price stability and is therefore at the core of the ECB’s primary mandate. It creates financial risks, which matter for both the ECB’s risk management of its own operations and for banking supervision. And with climate change being a priority for European lawmakers, the ECB shall take climate change into account, with reference to its objective to support the EU’s general economic policies without prejudice to price stability.
By doing so, the ECB can, within its mandate, act as a catalyst for greening the financial system. It can support the development of green capital markets, which are necessary to finance the transition to a low-carbon economy. And it can ensure that banks properly take climate-related risks into account in their lending decisions.

Chart 1
Global and European temperatures
(difference in degrees Celsius compared with pre-industrial levels)

Source: Annual global (land and ocean) temperature anomalies – HadCRUT (degrees Celsius) provided by Met Office Hadley Centre observations datasets.
Notes: Temperature anomalies are shown compared with the pre-industrial period between 1850 and 1899. The latest observation is for 2020.

From market neutrality to carbon neutrality
This week, the ECB presented the first milestone for incorporating climate change considerations into its monetary policy. One important measure concerns our private sector asset purchases. The ECB’s corporate bond portfolio has so far been guided by market neutrality and thus reflects the existing bond universe. However, it is companies from carbon-intensive sectors in particular that issue such bonds. This has led to a carbon bias in our portfolio and an accumulation of climate risks on our balance sheet. To reduce these risks, we will start tilting the reinvestments from maturing corporate bonds – around €30 billion every year – towards assets issued by companies with a better climate performance. This will gradually bring our corporate bond holdings onto a path that is aligned with the Paris Agreement and the EU climate neutrality objectives.
Additionally, we will limit the share of assets of high-carbon companies that can be pledged by a bank as collateral when borrowing from us. In the future, we will limit collateral to companies and debtors that are compliant with EU sustainable reporting standards.
These measures have two effects: first, they reduce our own climate-related financial risks and, second, they motivate bond issuers to improve their disclosures and reduce their carbon emissions. This will ultimately help steer capital towards supporting the green transition.
Testing banks’ resilience to climate stress
Climate change also plays a major role in our supervisory activities. Over the past few years, we have started to look much more closely at how climate change affects the banks under our supervision. Since we clarified our supervisory expectations in 2020 we have been pushing banks to improve how they manage and disclose climate and environmental risks.

Banks earn half of their income with heavy greenhouse emitters. This might be profitable today, but it won’t be tomorrow

As part of these efforts, we have now concluded a pioneering “bottom-up” climate stress test. We found that three in five banks still do not have a climate stress test framework in place. Only one in five banks consider climate risks when granting loans. And most banks rely heavily on proxy data to quantify their customers’ emissions with, on aggregate, half of banks’ income currently coming from heavy greenhouse gas emitters. This might be profitable today, but it won’t be tomorrow. So we will not stop reminding banks that they must take decisive action to address shortcomings and prepare for a timely transition to a carbon-neutral economy, while engaging closely with their clients.
Towards a greener financial system
Everyone involved in financial markets will need to prepare for the green transition and tackle the resulting risks. Our climate stress test proves, once again, that banks need to act boldly and urgently to better manage the risks from climate change. Our actions on the monetary policy side will not only reduce our own exposures to these risks, they will also encourage companies and banks to be more transparent about their carbon emissions – and ultimately to reduce them.
These efforts will make our financial system more resilient to the climate and environmental crises and better equipped for the green transition. There is still much more work to be done. This is only the beginning of a long journey. While the ECB’s actions are no substitute for ambitious and decisive action from governments and parliaments, within our mandate we have a duty to play our part, and we will do so.
This blog post appeared as an opinion piece in various newspapers and websites across Europe.
Authors:

Frank Elderson, Member of the ECB’s Executive Board

Isabel Schnabel, Member of the ECB’s Executive Board

Compliments of the European Central Bank.
The post ECB | Frank Elderson, Isabel Schnabel: A catalyst for greening the financial system first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

ECB to account for climate change in its corporate bond purchases, collateral framework, disclosure requirements and risk management, in line with its climate action plan
Measures aim to reduce financial risk related to climate change on the Eurosystem’s balance sheet, encourage transparency, and support the green transition of the economy

Measures to be regularly reviewed to check that they are fit for purpose and aligned with the objectives of the Paris Agreement and the EU’s climate neutrality objectives

The Governing Council of the European Central Bank (ECB) has decided to take further steps to include climate change considerations in the Eurosystem’s monetary policy framework. It decided to adjust corporate bond holdings in the Eurosystem’s monetary policy portfolios and its collateral framework, to introduce climate-related disclosure requirements and to enhance its risk management practices.
These measures are designed in full accordance with the Eurosystem’s primary objective of maintaining price stability. They aim to better take into account climate-related financial risk in the Eurosystem balance sheet and, with reference to our secondary objective, support the green transition of the economy in line with the EU’s climate neutrality objectives. Moreover, our measures provide incentives to companies and financial institutions to be more transparent about their carbon emissions and to reduce them.
“With these decisions we are turning our commitment to fighting climate change into real action”, says ECB President Christine Lagarde. “Within our mandate, we are taking further concrete steps to incorporate climate change into our monetary policy operations. And, as part of our evolving climate agenda, there will be more steps to align our activities with the goals of the Paris Agreement.”
The following concrete measures have been decided:

Corporate bond holdings: The Eurosystem aims to gradually decarbonise its corporate bond holdings, on a path aligned with the goals of the Paris Agreement. To that end, the Eurosystem will tilt these holdings towards issuers with better climate performance through the reinvestment of the sizeable redemptions expected over the coming years. Better climate performance will be measured with reference to lower greenhouse gas emissions, more ambitious carbon reduction targets and better climate-related disclosures.
Tilting means that the share of assets on the Eurosystem’s balance sheet issued by companies with a better climate performance will be increased compared to that by companies with a poorer climate performance. This aims to mitigate climate-related financial risks on the Eurosystem balance sheet. It also provides incentives to issuers to improve their disclosures and reduce their carbon emissions in the future.
The ECB expects the measures to apply from October 2022, and further details will follow shortly before then. The ECB will start publishing climate-related information on corporate bond holdings regularly as of the first quarter of 2023.
In any case, the volume of corporate bond purchases will continue to be determined solely by monetary policy considerations and their role in achieving the ECB’s inflation target.

Collateral framework: The Eurosystem will limit the share of assets issued by entities with a high carbon footprint that can be pledged as collateral by individual counterparties when borrowing from the Eurosystem. The new limits regime aims to reduce climate-related financial risks in Eurosystem credit operations. At first, the Eurosystem will apply such limits only to marketable debt instruments issued by companies outside the financial sector (non-financial corporations). Additional asset classes may also fall under the new limits regime as the quality of climate-related data improves. The measure is expected to apply before the end of 2024 provided that the necessary technical preconditions are in place. To encourage banks and other counterparties to prepare early, the Eurosystem will run tests of the limits regime ahead of its actual implementation. Further details, including the timeline, will be communicated in due course.
Additionally, the Eurosystem will, as of this year, consider climate change risks when reviewing haircuts applied to corporate bonds used as collateral. Haircuts are reductions applied to the value of collateral based on its riskiness.
In any case, all measures will ensure that ample collateral remains available, allowing monetary policy to continue to be implemented effectively.

Climate-related disclosure requirements for collateral: The Eurosystem will only accept marketable assets and credit claims from companies and debtors that comply with the Corporate Sustainability Reporting Directive (CSRD) as collateral in Eurosystem credit operations (once the directive is fully implemented). As the implementation of the CSRD has been delayed, the new eligibility criteria are expected to apply as of 2026.
This requirement will apply to all companies within the scope of the CSRD. It will help improve disclosures and generate better data for financial institutions, investors and civil society.
To encourage stakeholders to align with the new rules early on, the ECB will run test exercises one year ahead of actual implementation.
However, a significant proportion of the assets that can be pledged as collateral in Eurosystem credit operations, such as asset-backed securities and covered bonds, do not fall under the CSRD. To ensure a proper assessment of climate-related financial risks for those assets as well, the Eurosystem supports better and harmonised disclosures of climate-related data for them and, acting as a catalyst, engages closely with the relevant authorities to make this happen.

Risk assessment and management: The Eurosystem will further enhance its risk assessment tools and capabilities to better include climate-related risks. For example, ECB analysis has shown that, despite the progress already achieved by the rating agencies, current disclosure standards are not yet satisfactory.
To improve the external assessment of climate-related risks, the Eurosystem will urge rating agencies to be more transparent about how they incorporate climate risks into their ratings and to be more ambitious in their disclosure requirements on climate risks. The Eurosystem is in close dialogue with the relevant authorities on this matter.
Additionally, the Eurosystem agreed on a set of common minimum standards for how national central banks’ in-house credit assessment systems should include climate-related risks in their ratings. These standards will enter into force by the end of 2024.

Looking ahead, the Governing Council is committed to regularly reviewing all the measures outlined above. It will assess their effects and adapt them, if necessary: (1) to confirm that they continue to fulfil their monetary policy objectives; (2) to ensure – within its mandate – that the relevant measures continue to support the decarbonisation path to reach the goals of the Paris Agreement and the EU climate neutrality objectives; (3) to respond to future improvements in climate data and climate risk modelling or changes in regulation; and (4) to address additional environmental challenges, within its price stability mandate.
Companies and governments need to do their part to address climate risks by enhancing disclosures and following up on their commitments to reduce carbon emissions.
The decisions described above are part of the climate action plan announced in July 2021. The ECB’s work is progressing as outlined in the climate roadmap, and may have to be aligned if and when the timetable in EU legislation changes.
The ECB is also including climate change considerations in areas of its work besides monetary policy, including banking supervision, financial stability, economic analysis, statistical data and corporate sustainability. With this commitment, we aim to make a real difference in three ways: (1) by managing and mitigating the financial risk of climate change and assessing its economic impact, (2) by promoting sustainable finance to support an orderly transition towards a low-carbon economy and (3) by sharing our expertise to help foster wider changes in economic behaviour.
An overview of ongoing actions can be found in the ECB-wide climate agenda (see annex).
Contact:

Daniel Weber | Daniel.Weber1@ecb.europa.eu

Compliments of the European Central Bank.
The post ECB takes further steps to incorporate climate change into its monetary policy operations first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the Commission adopted a New European Innovation Agenda to position Europe at the forefront of the new wave of deep tech innovation and start-ups. It will help Europe to develop new technologies to address the most pressing societal challenges, and to bring them on the market. The New European Innovation Agenda is designed to position Europe as a leading player on the global innovation scene. Europe wants to be the place where the best talent work hand in hand with the best companies and where deep tech innovation thrives and creates breakthrough innovative solutions across the continent that will inspire the world.
By leading on innovation, in particular on the new wave of deep-tech innovation requiring breakthrough R&D and large capital investment, Europe will reinforce its central role in shaping the green and digital transitions. Deep tech innovation will reinforce Europe’s technological leadership and generate innovative solutions to pressing societal challenges, such as climate change and cyberthreats. Such innovations are likely to irrigate and benefit all sectors from renewable energy to agri-tech, from construction to mobility and health, thereby tackling food security, reducing energy dependency, improving people’s health and making our economies more competitive. The severe consequences of Russia’s war of aggression has given these issues even greater urgency and prompted strategic policy changes to ensure the EU’s prosperity and security.
Margrethe Vestager, Executive Vice-President for a Europe fit for the Digital Age, said: “We need to boost our innovation ecosystems to develop human-centered technologies. This new Innovation Agenda builds on the significant work done already on innovation in the last years and will help us accelerate our digital and green transition. The Agenda is rooted in the digital, physical and biological spheres and will enable us tackle better burning concerns, such as breaking the dependence from fossil fuels or securing our food supply in a sustainable way.”
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth, said: “The new European Innovation Agenda will ensure innovators, start-ups and scale-ups, their innovative businesses to become global innovation leaders. For more than a year we have consulted the stakeholders, such as innovation ecosystem leaders, startups, unicorns, women founders, women working in the capital venture, universities, and businesses. Together, we will make Europe the global powerhouse for deep-tech innovations and startups.”
Building on Europeans’ entrepreneurial mindset, scientific excellence, the strength of the single market and democratic societies, the New Innovation Agenda will in particular:

Improve access to finance for European start-ups and scale-ups, for example, by mobilising untapped sources of private capital and simplifying listing rules;
Improve the conditions to allow innovators to experiment with new ideas through regulatory sandboxes;
Help create  “regional innovation valleys” that will strengthen and better connect innovation players through Europe, including in regions lagging behind;
 Attract and retain talent in Europe, for example by training 1 million deep tech talents, increasing support for women innovators and innovating with start-up employees’ stock options;
Improve the policy framework through clearer terminology, indicators and data sets, as well as policy support to Member States.

The New European Innovation Agenda sets out 25 dedicated actions under five flagships:

Funding Scale-Ups will mobilise institutional and other private investors in Europe to invest in, and benefit from the scaling of European deep-tech start-ups.

Enabling innovation through experimentation spaces and public procurement will facilitate innovation through improved framework conditions including experimental approaches to regulation (e.g. regulatory sandboxes, test beds, living labs and innovation procurement).

Accelerating and strengthening innovation in European Innovation Ecosystems across the EU will support the creation of regional innovation valleys and help Member States and regions direct at least EUR 10 billion to concrete interregional innovation projects, including in deep-tech innovation for key EU priorities. It will also support Member States to foster innovation in all regions through the integrated use of cohesion policy and Horizon Europe instruments.

Fostering, attracting and retaining deep tech talents will ensure the development and flow of essential deep tech talents in and to the EU through a series of initiatives including an innovation intern scheme for startups and scale-ups, an EU talent pool to help startups and innovative businesses find non-EU talent, a women entrepreneurship and leadership scheme and a pioneering work on startup employees’ stock options.

Improving policy making tools will be the key for development and use of robust, comparable data sets and a shared definitions (startups, scale-up) that can inform policies at all levels across the EU and for ensuring better policy coordination at the European level through the European Innovation Council Forum.

Building on the substantive work that have been done already to foster innovation in the EU, the New European Innovation Agenda aims to accelerate the development and scaling up of innovation across the Union through a coherent set of actions.
Background
Innovation policy is a crucial policy area with significant EU initiatives and investments.
This is complemented by the work on European Research Area (ERA) aiming to build a true European single market for research and innovation. The measures put forward in this communication, grouped under five flagship areas will leverage the strengths of the EU’s Single Market, strong industrial base, talents, stable institutions and democratic societies to drive deep tech innovation in Europe, and deliver on the opportunities offered by the twin transition and the need for future strategic autonomy.
Deep-tech innovation is rooted in cutting edge science, technology and engineering, often combining advances in the physical, biological and digital spheres and with the potential to deliver transformative solutions in the face of global challenges. The deep tech innovations that are emerging from a growing cohort of innovative startups in the EU have the potential to drive innovation across the economy.
The toolkit of EU innovation policy has expanded over the years and the institutional landscape has changed with it. With its Innovative Europe pillar, Horizon Europe has given rise to both existing and new tools to support start-ups, scale-ups and Small and Medium-Sized Enterprises (SMEs). The European Innovation Council (EIC) established in 2021 and with a budget of €10 billion, aims to support innovation throughout the whole innovation lifecycle, from the early stages of research to proof of concept, technology transfer, and the financing and scaling up of start-ups and SMEs. The European Institute of Innovation and Technology (EIT) took on additional tasks by establishing new Knowledge and Innovation Communities (KICs) such as on culture and creative sector, putting more emphasis on addressing regional imbalances, and looking at increasing the entrepreneurial and innovation capacity of higher education institutions. Via the European Innovation Ecosystems initiative of Horizon Europe, the EU also aims to create more connected and efficient innovation ecosystems to support the scaling-up of companies, encourage innovation and stimulate cooperation among national, regional and local innovation actors.
Russia’s invasion of Ukraine has given the need of innovation even greater urgency. It has also spurred additional support to the Ukrainian innovation community – scientists and researchers who have been key contributors to EU research and innovation. The EU has set up €20 million support for Ukrainian start-ups through the European Innovation Council. This complements the ‘European Research Area for Ukraine’ (ERA4Ukraine), Horizon4Ukraine and ERC for Ukraine initiatives, as well as the dedicated fellowship scheme of €25 million under the Marie Skłodowska Curie Actions (MSCA) for displaced researchers of Ukraine.
Compliments of the European Commission.
The post EU Commission presents new European Innovation Agenda to spearhead the new innovation wave first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.