WORLD COMMERCE SUMMER 2021 REVIEW

The BVI fintech Fleur de Beaufort Jon Cunliffe talks transformation. Simon and Patrick van Schie about the future of Gray charts the growth interpret the results money in an increasingly of the BVI to a global of the Dutch elections digital world fintech hub and ‘populism’

THE GLOBAL TRADE AND FINANCE PLATFORM www.worldcommercereview.com have beenimpossiblebefore thepandemic us save Wecould are at acrossroads. argues IanGoldin that for the pandemichascreated changewhichwould opportunities pandemic the How Soeren identify HennandJamesRobinson latent assetsinAfrica that bodewell for sustainedeconomic growth assets latent Africa’s better? together China-WTO relationship canbereformed andimproved work they can how The to islimited shapeChina'sWTO initsability trade policy. Petros Mavroidis andAndré consider Sapir how the WTO: the and China relationship itwouldexpectations liberalise andopenup uneasy an Petros Mavroidis andAndré examine Sapir theChineseeconomic andtrading structure,WTO: that hascontinued despite the and China China’s behaviour were misguidedfrom thestart meet systems two Petros Mavroidis andAndré focus Sapir onthebuild-upto Chinajoiningthe WTO, andargue for that expectations WTO: the and China CONTENTS www.worldcommercereview.com enabler inthegrowth ofthefinancialsystem anddigital money haveCryptocurrencies foreshadowed apotential digital future for money.cryptocurrencies Graham Brightseesblockchainasan of future The an innovation andinvestment hotspotacross thefintech anddigital space From centre atraditional financialservices to aglobalfintech hub,transformation theemergence BVIas Simon ofthe Gray charts fintech BVI The for thealternativesupport 'populist'parties ‘populism’ and Fleur andPatrick deBeaufort interpret van Schie theresults oftheDutch andconsider elections, thegrowth inthe elections Dutch The to thriveconnecting changer game ispoisedto beagamechanger. connectivity Multi-modal onhow and Jithin Sabu theBBINis Ganguly Arnab connectivity A future relations now dependsbothontheEU’s response andondomesticdevelopments relations? Switzerland’s talkswiththeEUwill have decisionto abandonInstA widespread consequences. Stefanie Walter says Swiss-EU vadis, Quo CONTENTS www.worldcommercereview.com Towards a green capital markets union the growth ofsustainablefinance markets Lagardecapital Christine considers theEuropean Union’s transition towards asustainableeconomy that willbebackedby green a Towards for ambitiousreformargue ofanow thisisanopportunity outdated clearly fiscalframework framework fiscal European The European fiscalruleshave beensuspended the to enablememberstates to combat etal the COVID crisis.Martin for template new A an increasingly digital world money’? forThe Bankof Englandhasissuedbanknotes over 300years. JonCunliffe talksaboutfuture ofmoneyintheUK ‘public need we Do of payment again new is talksaboutstablecoins. Segal-Knowles Christina Shelooksat how theycould beregulated iftheyare used asaform old what's Stablecoins: digital go payments a digital dollar as money bank Technology dramatic isdriving changeintheUSpayments system.central LaelBrainard provides anupdate onCBDCsand and money Private CONTENTS www.worldcommercereview.com environment Jonathan says Sharp now isthetimeto adaptcompany strategy andculture to respond to thechanging business start-up a like act to Time the potential benefitsthat may emerge from thecurrent challenges Internationalisation, accreditation Osbaldeston andAdriana andthepandemic-Michael Kudrnová Lovera lookat linings Silver ahead to thereturn ofin-persongatherings post-pandemic industry our Ed considers Bolen how the businessaviation adapted community to newforms ofcommunication, andlooks connected EBACE Virtual hydrogen hydrogen withlow-carbon to meetthe2050emissionstarget hydrogen McWilliamsBen mustaddress andGeorg Zachmannargue theneedto that displace policymakers carbon-intensive through Navigating Europe of EU shouldconsider aborder adjustment carbon mechanismto incentivise othercountries to join border the at and The by EUhasannounced neutrality 2050asthekeytarget carbon oftheGreen Deal.etal. Schmidt argue that the within carbon of Pricing CONTENTS

www.worldcommercereview.com T Trade wars FOREWORD which hasbeenonthisroad longerthantheUnited States, willendupliketheEastern Blocoftheseventies, poor are sectors andlowGovernment-directed invariably industrial growth. poor-performing There that isarisk Europe, business, notjusttheshareholders ofthebusiness. of thesociety, theenvironment, thecommunity, thepeoplewhowork withinthebusiness, thecustomers ofthe is encapsulated theneeds inacommitment to asstakeholdercapitalism,whichfocuses what isknown onserving European are UnionandtheUnited Kingdom united intheopposite mission:to backbiggovernment. bring This When and Reagan Thatcher wanted to cutbackthesize ofthestate, itchangedtheworld. Now theUnited States, governance-friendly policies that the US and Europe in particular are policiesthat theUSandEurope inlovegovernance-friendly inparticular with. storm situation withthelow-growthare alsocoinciding environmental, inaperfect socialandcorporate Fortunately,to bepaidback. interest rates are low currently level. at avery However, thesehighdebtlevels tohe politicalreaction COVID-19 hasplungedthe West into anever-greater debtburden, whichwillhave www.worldcommercereview.com transformation beenoughto counteract theinfluence oftheliberal elite? That isthe question.■ were openedup, isnow endingaseconomies are increasingly becoming more protectionist. Will thetechnological isanironyIt that thegreatest wealth-creating, inhistory, period poverty-reducing wheneconomies worldwide multiple ofany figure, issure anddelivery to be overdue. And for what? The cost ofthetransition to net-zero to hasnotbeendisclosed. cost Agovernment-driven a iscertain project public spending. and more specifictargets, we need to thesewillhaveexplore theimpact onjobs, total output andincomes and thegreenIn agenda,for example, to translate asgovernments anet-zero start 2050target term into asetofshorter whether theyare aboutworker rights, taxes carbon ordiversity, are animpediment to growth. by doinggood for andgoodfor society theplanetby behaving responsibly asagovernment. barriers, Non-tariff relationships are increasingly beingdriven by theESGagenda–Environment, Social, Governance agenda–and common enoughintheOECDcountries aswell. Trade from protectionism arises afear andfailure to compete. Trade Governments domesticpoliticalconstituencies favouring at theexpense ofinternational important trade is publicinvestments.capitalism, corruption andloss-making seldomgrew astheirindustries America, upto compete inworld markets. They instead becameconduits for crony led tofailed barriers wall andnon-tariff economic development oftariff Asia, inpost-colonial and Africa Latin Trade industrialisationbehinda protectionism has longroots Import-substituting andisstillalive andkicking. Fortress Europe protectionist Europe that iscoalescing infront ofoureyes. and years behind thecapitalist West (orinthiscase, ChinaandtheAsian economies). This willbetheresult ofthe Bermuda is a leading WOULDN’T YOU RATHER offshore jurisdiction for BE WORKING FROM HERE? insurance, reinsurance, financial services, banking and Fintech. It has a world-class reputation for progressive legislation and robust regulation, and is a safe and business-friendly market. Also, it is welcoming digital nomads, investors, creators and innovators who are taking advantage of the one-year, renewable residency visa to live, work and play in Bermuda.

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ECONOMIC DEVELOPMENT DEPARTMENT GOVERNMENT OF BERMUDA Economic Development Department : 1 441 294 9074 : [email protected] www.worldcommercereview.com to Chinajoiningthe WTO, andargue for that expectations Petros Mavroidis andAndré focus Sapir onthebuild-up China’s behaviour were misguidedfrom thestart China andthe WTO: two systems meet www.worldcommercereview.com C paradigm. astheindelible etchingwould oftheliberal onthewall commemorating stay inhistory thedefinitive victory Despite someapprehension, China’s accession to the in2001was hailedasamagnificentWTO achievement that economic principles. system andthelargest population intheworld joinanorganisation conceived andoperated onessentially liberal The exceptionally longaccession negotiation withasocialisteconomic reflected thechallengeofhaving a country tonegotiations agree for onChina’s thetwo parties ‘Protocol ofAccession’ to the WTO. members failedto reach anagreement by 1995,whenthe succeededWTO GATT. thentook another 18rounds It of thefollowingnegotiations year. starting Despite 20rounds ofnegotiations, Chinaandtheincumbent GATT toChina formally theGATT sought the resumption ofitsstatus asacontracting party in1986, withaccession following Xiaoping’s Deng economic reforms. withtheagreement. nocontact China hadpractically Butthesituation changedinthelate 1980s, 1970sandearly but itsstatus was theformation deactivated in1950after ofthePeople’s Republic. For three thenext decades, to theGeneralAgreementChina was oneoftheoriginal contracting parties on Tariffs and in1947, Trade (GATT) arguing for that expectations itssubsequent behaviour were misguidedfrom theoff. ofthreefirst inaseries columns presents thebuild-up to Chinajoiningthemultilateral trade agreement, for ofthe theliberal paradigmat –part thetimeasavictory ‘end ofhistory’. remain. Buttoday frictions This hina’s ascension to the followedWTO years ofnegotiations withtheincumbent membersandwas hailed www.worldcommercereview.com answer canalso beseenasbeingacaseof ‘sub-optimal contracting’. so quickly? The answer ismulti-faceted. Chinadidnotchange. The problem islargely oneoffalseexpectations. The What thepast20years? haschangedduring Chinaorthe How sosour WTO? turn canaseeminglyhappy marriage mutually incompatible. world at least– are consistently negative. Increasingly, there isafeeling thatChina andthe perhaps areWTO But 20years later, themoodhaschangedradically. Today, newspapers headlinesconcerning China–inthe Western very fast-growing economy without frictions without economy fast-growing very to incorporate into the trading system a very large and and large very a system trading the into incorporate to have occurred, as they did with Japan. It is not possible possible not is It Japan. with did they as occurred, have economy by becoming an OECD member, frictions frictions member, OECD an becoming by economy Even if China had, like Japan, become a Western-style Western-style a become Japan, like had, China if Even www.worldcommercereview.com incorporated into theInternational Trade Organisation (ITO). The GATT entered theworld ofinternational relations asaninterim organisation that was meant to beeventually theparty,No one gate-crashed buttheclubisnotwhat itusedto be nations to have access to goodsthat concerns 1971). could inadvancing (Schelling becritical national security West theCold during War. Trade policy, all, –since after itallows broadly defined, policy trading isnational security This choice was consistent withtheideathat GATT, besidesbeingatrade agreement, ofthearsenal was part the numberofseats around theGATT negotiating tableto ahomogenousnucleusofliberal economies. market etal.(2008)have shown thatThis aconscious at should notcome all:Irwin decisionwas assurprise takento restrict agreed GATT-think aliberal economy. to function: national treatment, andnon-violation complaints. Tumlir (1984),andZeiler (1999)focus for onthepre-requisites the (1970) classicaccount, theGATT bargain, isatariff the value of whichisinsured through legal disciplineslike Economists and historians alikehave described ‘GATT-think’, Baldwin’s bothitsexplicit anditsimplicitdimension.In The GATT liberal understanding these analyses, inwhat follows we concentrate onChinaandthe WTO. claiming that we are probably traversing yet another Thucydides’ trap. whilewe Nevertheless, takeonboard all there isanosmosis between thegeneral andthespecific. Allison (2017)offered inthis aperspective context, when in the WTO, notChinaintheworld economy orChinaintherealm ofinternational relations. We donotdeny that We begin withacaveat: inthiscolumn, inspired by ourrecent book(Mavroidis 2021),we and Sapir discussChina www.worldcommercereview.com decade after joiningtheGATT,decade after was theclearest sign that Japanhadjoinedthe Western ‘club’. membershipoftheOECD,Its withitsvarious ‘codes ofconduct’ ofeconomic (inlinewiththeprinciples liberalism), a joined theGATT, there was never any doubtthat itwould eventually espousethe Western economic model. economics butalso, andprimarily, occupation withgeopolitics. ofJapanby Given theUSat thetimeit themilitary Yet, there differences were alsostriking between the West’s to JapanandChina.reaction These had to dowith toreactions Japan’s ownto enter efforts theGATT-world. to someofthereactions China’s fact, In attempt to access theGATT andthenthe were reminiscentWTO very ofthe reason. Japanwas, ofcourse, alarge economy, growth and its export-led modelwas viewed asathreat. role intheJapaneseeconomy, andmany GATT incumbents were reluctant to accept Japanintheirmidstfor this The GATT was notamendedwhenJapanjoinedGATT inthe1950seither, althoughthestate played animportant disciplines, since allfour countries were smallshares interms ofinternational very trade. to translateThe incumbents didnotfinditnecessary theliberal understandingimplicittheGATT into explicit legal (in the1970s). andRomania Hungary coherence oftheSoviet bloc, theGATT gradually openeditsdoorsto Poland and Yugoslavia (inthe1960s),then saw thelight ofday. hopingto persuadethemto inorder changecourse, to place part adent andinpart onthe In The ITO was supposedto become amultilateral organisation. The GATT followed suiteven thoughtheITO never www.worldcommercereview.com market). Formarket). many, Chinawas thebiggestprize ofthe21 accessing theworld’s fastest growing withthe biggestpopulation market (soonto become theworld’s biggest Even thosewhodidnotbuy into the ‘China changes’ could seethehugepotential economic story benefitsof China, obtainingbilateral trade surpluses. for products, industrial andfrom 31to 14%for andasaresult, products); farm theUSwas boundto gainmore than keeps itstariffs at the samelevel China’s after accession; China greatly reduces andcapsitstariffs (from 25 to9% course,Of there were sceptics too, especiallyintheUS. Buteven theybought into asimplisticnarrative: theUS liberal butalsoaliberal market, democracy. As we someUSstatesmen note went inourbook, sofarasto state publiclythat Chinawould become notonlya ofliberalism hadarrived, Berlin wall andthefallof was onlythebeginning.definitive victory Buoyed by Fukuyama’s (1992)pronouncement of endofhistory’,‘the theyseemedto espousetheviewthat the that withDeng’s reforms Chinahadentered street, economy aone-way withmarket beingtheenddestination. The GATT/WTO onitsdoor. liberal understandingwas stillimplicitwhenChinaknocked incumbents assumed WTO This timeisdifferent which is in direct contradiction withthe which isindirect WTO’s implicitliberal understanding. But what isdifferent with Chinaisthat has retained substantial state involvement ofitseconomy, inthe working possible to incorporate into fast-growing the trading large system economy andvery avery withoutfrictions. a Western-style economy by becoming anOECDmember, have frictions occurred, isnot astheydid withJapan.It The economic dream hasbecome reality, butsohave with China.Even thefrictions ifChinahad, likeJapan,become st century. www.worldcommercereview.com Irwin, DA, PCMavroidis andAOIrwin, Sykes (2008),The oftheGATT, Genesis Cambridge, MA: Cambridge Press. University Fukuyama, andtheLast Man,NewYork F(1992),The EndofHistory City, NY: Free Press. Baldwin, RE(1970),“Non-Tariff ofInternational Distortions Trade”, Institution: Brookings Washington, DC. Harcourt. Mifflin forWar:Allison, G(2017),Destined Can America andChinaEscape Thucydides’s Trap?, NewYork City, NY: Houghton References a Professor at Universite Libre deBruxelles Fellow andaSenior at Bruegel Petros C Mavroidis is the Edwin B Parket Professor of Law at Columbia Law School, and André is Sapir ofthispresentation ■ ofourbook. part next China’s have come trade partners to realise thecountry’s after accession to the WTO. We return to thisissueinthe Nodoubt, lotsofassetshave beencorporatised,partners). butcorporatisation does notmeanprivatisation, as enterprises’ as (known ‘Wofers’), privatisation hasbeenslow (orat leastslower by thanexpected China’s trade some openingoftheeconomy hasoccurred over theyears, and itisnow possibleto have foreign‘wholly-owned But according to madeup63%of officialChinesestatistics totalemployment thepublicsector in2019. While private sector. owned enterprises (SOEs),andomnipresent policies, industrial theChinese economy leaves someroom for the where, unlikein Western economies, thestate’s (ortheCommunist Party’s) role isparamount. Dominated by state- itseconomicChina describes system as ‘socialist economy’. market isamixofprivate initiative It andstate planning, www.worldcommercereview.com This article was firstpublishedonVoxEU.orgThis article Zeiler, (1999),Free Trade, TW Free World, Carolina Hill, Press. Chapel ofNorth NC:University 34:71–83. undGesellschaft Wirtschaft Tumlir, J(1984),“International Economic OrderandDemocratic Constitutionalism”, JahrbuchfürdieOrdnung ORDO: von Press. WhyMultilateralismMavroidis, Matters, (2021),ChinaandtheWTO: PCandASapir Princeton, NJ:Princeton University www.worldcommercereview.com Petros Mavroidis andAndré examine Sapir theChinese an uneasyrelationship despite itwould expectations liberalise and openup economic andtrading structure, that hascontinued China andthe WTO: www.worldcommercereview.com H having bilateral balanced trade. Butthepoliticsoftrade indifferent, especiallyintheUS. for isaboutestablishing competitive nationsWTO to exploit opportunities theircomparative advantage, notabout Economists rightly argue that bilateral trade balances many reflect otherthantrade policiesandthat factors the $309 were were $472billion. $163billion;imports billion. Exports trade deficitwithChina was The USgoodsandservices trade withChina totalled anestimatedmassiveIn 2019,USgoodsandservices $635 trade deficits with China. But China’s integration intheworld economy hascreated especiallywiththeUS,whichhaslonghad frictions, level ofSudanin2001to thelevel nearly ofMexico today. thesameperiod, China’s73%. During percapitaincome (measured at purchasing power rose parities) from the database, China’s GDPamounted to barely 13%oftheUSGDPin2001. Twenty years later, thisratio islikelyto reach Fast growth hasboosted (andimport) GDPgrowth export andincome levels. According to theIMF’s 2021 April WEO unit). Since 2009, ithasbeentheworld’s largest goodsexporter, even surpassing theEUblocfrom 2014onwards. iftheEuropean ofgoodsintheworld (fourth, largest Unioniscounted exporter 2001, Chinawas thesixth asone On 11December 2001,Chinaofficiallyjoinedthe WTO. Itsachievements since then have In beentruly remarkable. 1 – a far cry from theforecast here –afarcry series whenChinajoinedthe ). (seethefirst WTO column inthisthree-part owned enterprises operate withinthemultilateral system. off pressures to changeitseconomic andtrading structure strategy, regarding how itsstate- particularly economy.market This second ofthree inaseries columns how describes Chinahasbeenableto shrug aving joinedthe WTO, many Western countries Chinato expected soonliberalise andbecome anopen www.worldcommercereview.com When Chinajoinedthe WTO, itnegotiated layers three distinct ofobligations: China’sobligations WTO well by its notrespecting obligations.WTO Buthasthisbeenthecase? ofChina’sCritics trade policy, notonlyintheUSbutalsoEUandelsewhere, argue often that Chinahasdone • Aspects of Intellectual Property Rights (TRIPs), andtheDispute Understanding(DSU); Settlement (TRIPs), Rights Property ofIntellectual Aspects Tariffs and General the Trade(GATT), Agreement on (GATS),Services Trade in theagreement on Trade-Related The multilateral framework that appliesto all membersandconsistsWTO oftheGeneralAgreement on is the simple answer simple the is market under the existing WTO regime? ‘Not much’ much’ ‘Not regime? WTO existing the under market What can be done to further open up the Chinese Chinese the up open further to done be can What www.worldcommercereview.com Protocol ofAccession didnotaddress thegaps. As ofourseries, we itisthelatter willdiscussinthethird approach part that getsourvote. All themore so, since the to bow outofthe TPP. Progressive TPP (CPTPP), thetrade agreement amongtheremaining TPP signatories President after Trump decided have demanding disciplineregarding to adjustto avery SOEs, as Vietnam hadto doto jointheComprehensive and withChinainmind, Chinaever withoutimplicating Chinainnegotiation. If wishedto accede to (TPP) TPP, itwould A few years later, President Obamaadopted theopposite strategy. Henegotiated the Trans-Pacific Partnership Agreements. system, thoughalsopresent inmany othercountries, includingEUmemberstates –istotally missinginthe WTO thatevidence the toterm thiseffectisthefact ‘SOE’ enterprise) –akey feature (state-owned ofChina’s economic The multilateral framework was negotiated theUruguay during Round, withoutChinainmind. The mostglaring multilateralWTO framework andChina’s Protocol ofAccession. Consequently, to thelegalbenchmark judgewhetherChinahasrespected its commitmentsWTO isthesumof • • belong to Civil Aircraft agreement. China’s own Protocol ofAccession. Chinapromised to jointheGPA buthasnotdonesoupto now, nordoesit Procurement Agreement (GPA) and/ortheAgreement on Trade inCivil Aircraft A plurilateral framework that appliesto onlyasubsetof memberswishingto WTO jointheGovernment www.worldcommercereview.com example, that SOEsare ‘public bodies’ intheSCMsenseofterm. have beenusedto ‘complete’ thedeficient SCM Agreement details to explicitly acknowledge, andaddimportant for various Agreements,WTO includingtheAgreement onSubsidiesandCountervailing Measures (SCM),whichcould China joinedthe was Round initiated. whentheDoha WTO mandateThe Round Doha includedrenegotiation of The DohaRoundmandate muchanitem forand very inclusioninany Protocol ofAccession. a Protocol ofAccession caninclude. The intensive margin (eg. thelevel oftariffs) isof course amatter ofnegotiation, agreesassuming theacceding country to adhere to oneormore ofthem)circumscribe thesumofobligations that The extensive margin ofobligations includedinthemultilateral agreements (andtheplurilateral agreements, confirm thispoint. foresight. language aswell mannerby –discussedinexemplary aspractice thestatutory Both Williams (2008)– And, ofcourse, theProtocol ofAccession could substitute have for deficient never legislative beenaperfect policies,or pricing there isprecious littleintheProtocol interms ofbindingcommitments intheseareas. translate into legallyenforceable obligations. So, variousbest-endeavours whilewe clausesonprivatisation observe The Protocol contains many best-endeavours clauses, ofthenegotiated thespirit whichreflect butdonot contract economy.market And thisprovision probably permeatingallremaining explains thespirit provisions aswell. probably irrational exuberance. even Incumbents setadate, Chinato 2015,whentheyexpected have become a The Protocol ofAccession the reflects Zeitgeist at thetimewhenChina was negotiating itsaccession: exuberance, The Protocol ofAccession: hope, andthelegitimate limitsofhope www.worldcommercereview.com disputes itfaces at the asrespondent,WTO thenChinaisdefinitely under-represented. is probably we to somemerit thisclaim.If useacountry’s share ofglobal trade asapredictor for the numberof There isageneral claimthat there has beenunder-enforcement andthere againstChina by itstrading partners, why notlitigate more? is telling, inandofitself. themembershipcomplains abouttheinvolvement If ofSOEsintheChineseeconomy, then Two complaintsWTO have beenraised sofarimplicating ChineseSOEs, andbothhave beenraised by …China. This agreements withChinesecompanies andtransfer themtheirtechnology). by thedejurerights (typified obligation ordefacto for foreign investors inChina to enter into joint venture enforcement property ofintellectual two issues:themannerinwhichSOEshave been operating, andthe(lackof) oftheUS,EU, withChinaonthepart andother Dissatisfaction Western countries hascentred mainlyaround Can litigation dowhat negotiation didnotdo? Now, isallbutgoneandwe Round the Doha are backto square one. competition law by continues theChineseauthorities to passthetrading by community stealth. Agreement onInvestment (CAI), whichhasbeenassessedby (2021).Similarly, DadushandSapir enforcement of The EUrecently to tried remedy thissituation (butonlyfor EUinvestors) withthebilateral Comprehensive EU-China for foreigners inChina. Cancun (in2003)didnothelpeither. Various investment-related have practices continued to access plaguemarket Abandoning the ‘Trade and Competition’ and ‘Trade andInvestment’ initiatives at the in Meeting Ministerial WTO www.worldcommercereview.com state, whichisrarely ornever thecase, foreign investors willnotprevail ina litigation. WTO Unless theobligation to transfer inajoint venture technology to a Chinesepartner canbeattributed to theChinese pending. Why nothingmore? For onesimplereason: the doesnotpunishthebehaviourWTO by private agents. routinely complain about? There hasonlybeenonelitigation againstChina,by theEU, ina casethat isstill WTO What aboutthe vexed issueofforced technology transfer that foreign companies wanting to invest inChina this context aswell. at least)into abeyance. Legislators could have provided clearer legislative guidance, but adjudicatorsWTO failedin thatBy time, the Trump Administration hadpulledtherugunder Appellate Body, condemning it(provisionally considered ‘public bodies’ –acomplete over U-turn caselaw theprior –was too littletoo late. presumptively ‘public bodies’. eventual findinginasubsequent Its casethat even private companies could be asimilarvein,In theAppellate hasheldthat Body SOEs100%owned by the Chinesestate are noteven accordance withcommercial considerations essentially redundant. behaviour,of SOEs–by narrowing theobligation imposedto non-discriminatory in theobligation to act making hasevisceratedBody thelegaldisciplineimposedby enterprises (STEs)–asub-set GATT onstate-trading XVI Article But whenlitigation hasoccurred, theoutcome hasnotbeenexhilarating for complainants. The AppellateWTO provoke thewrath by oftheChineseauthorities litigating theirrights. There issomeevidence to thiseffect. isplausiblethat variousforeignIt investors prefer to ‘bite thebullet’ andstay rather intheChinesemarket than www.worldcommercereview.com we guarantee that China willopenup?’ terms ofaccession seemto have spent more timethinking ‘how canwe blockChineseexports?’ thanasking ‘how do The conclusion isthat adjudication isnosubstituteWTO for deficientWTO legislation. Those whonegotiated the ofitshugesurplus. small, infinitesimalsimply have withavery portion to part But more to thepoint, prevailing inthiscontext doesnotentail anobligation for Chinato amenditsregime. will It the allocation ofburden ofproof under law.WTO litigating Chinesemeasures (andthere are many) preceding China’s negotiationbindings. oftariff This isbecauseof Mavroidis (2021),weIn andSapir disagree. For thisinstrument canbeofalmostnohelpwhenitcomes starters, to means to channeldisputes againstChina. the Appellate Body, Jennifer (2018)hasclaimedthat non-violation Hillman complaints could provide anadequate answer. There isalotinterms of ‘spirit’ butnobindinglanguageintheProtocol ofAccession. Aformer memberof undertheexisting openuptheChinesemarket What canbedone to further regime?WTO ‘Not much’ isthesimple their markets. to thanslowing down pace thealarming ofChineseexports afarbiggerpriority andiscertainly trading partners provision that would have obligedChinato openitsclosedmarket. This isthemainproblem faced by China’s from theanti-surge clause(whichprotectsBut apart against ‘excessive’ shedidnotpoint to any Chineseexports), deplored theunder-use ofcommitments madeby ChinainitsProtocol ofAccession to litigate at the WTO. Representative, thinksthisway. arecent BusinessCouncil In inShanghai,she (2019)speechat theUS-China Have complainants beenpursuingthewrong legalstrategy? Certainly, Barshefsky, Charlene aformer US Trade www.worldcommercereview.com Group. Zoellick RB(2020),America intheWorld, andForeign ofUS Diplomacy AHistory Policy, NewYork City, NY: Hachette Book Williams, PJ onAccession (2008),AHandbook to theWTO, Cambridge, UK:Cambridge Press. University Press. WhyMultilateralismMavroidis, Matters, (2021),ChinaandtheWTO: PCandASapir Princeton, NJ:Princeton University DC. Hillmann, J(2018),“Testimony Commission”, Economic andReviewSecurity before theU.S.-China US Senate, Washington, Contribution 09/21. (2021),“IstheEuropean UandASapir Union’sDadush, investment agreement with Chinaunderrated?”, BruegelPolicy References https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china1. See Endnotes a Professor at Universite Libre deBruxelles Fellow andaSenior at Bruegel Petros C Mavroidis is the Edwin B Parket Professor of Law at Columbia Law School, and André is Sapir recently askedthemto do. We ofourseries. ■ to willturn thisdiscussioninthethird part world trading community, Chinaincluded, willhave to behave like ‘responsible stakeholders’, asZoellick (2020)has We have, sofar, painted arather bleakpicture. Isthere light at theendoftunnel?Maybe, butto getthere the Is there asilver lining? www.worldcommercereview.com first publishedonVoxEU.org Editor’s seriesonChinaandtheWTO. Readthefirst note:column here This isthesecond inathree-part . This article was . This article www.worldcommercereview.com policy. Petros Mavroidis and André consider Sapir how the China-WTO relationship canbe reformed andimproved The to islimited shapeChina'sWTO initsability trade China andthe WTO: how cantheywork together better? www.worldcommercereview.com T rather thanretracting it. And hehad, andstillhas, littleincentive to dootherwise. was notreally asurprise,It therefore, that President Xihasmoved towards re-invigorating therole ofthestate, together.” fundamental economic system under whichpublicownership isthemainstayanddiverse formsofownership develop people… andcollective ownership thestate stageofsocialism, shallupholda by theworking people… Intheprimary the People’s public ownership RepublicofChinaissocialist thatis, ofthemeansproduction, ownership by thewhole China’s economic foundationofthe socialist system of 6states clearaboutthis. that: “The constitution Article isvery important. in general only paidattention to thewords ‘market economy’. Butfor theChinese, theword ‘socialist’ was equally the WTO. only promised to It become a ‘socialist economy’. market The Western countries andthe membership WTO This isaclear caseofcognitive dissonance. Chinanever committed to becoming a ‘market economy’ whenit joined theUSandEU, inparticular feelpartners, that Chinahasnotlived upto theirexpectations. been implicitintheGATT andthenthe agreements.WTO thesecond part In China into theirmidst, itseconomic system would gradually converge to theliberal economic system, whichhas thefirstpar In between signatories. clearer guidelines on state-owned enterprises, aswellclearer asnewrulessurrounding guidelines onstate-owned thetransfer oftechnology how therelationship could bereformed andimproved goingforward. The authorshighlight theneedfor attempts to leverage multilateral pressure have sofarfailed. This third ofthree inaseries columns explores ofthe he ability hasbeenseverely toWTO shapetheway itstrade policy Chinaconducts limited, andmost t of this three-part series, we argued that t ofthisthree-part that by membershadhighexpectations admitting WTO , we saw that many ofChina’s trading www.worldcommercereview.com understood inthe Western world. of state was more aquestionofcorporatisation of(former) state assets, rather than privatisation –especiallyas dissolve theparty, since healways thought that itsrole was state crucialindirecting affairs. And the reduction Not that regime aserious changewas ever onthecards. excoriated Deng Chairman Gorbachev’s decisionto probably even better than)anyone else. So, why change? will onlyreach 106%and theEU102%oftheir2019levels. Chinaemerged from asgood(and theGlobalCrisis According to theIMF’s 2021 April WEO database, China’s GDPwillreach 117%ofits2019level in2022,whiletheUS that. Chinaweathered muchbetter the2007-2008GlobalCrisis thanothers. The sameholdsfor theCOVID-19 crisis. otherbigadvancedChina, asis, andemerging hasbeenoutperforming economies for sometime. And notonly care of the concerns that emerge that concerns the of care legal framework that is hardly appropriate to take take to appropriate hardly is that framework legal ... the world trading community is now stuck with a a with stuck now is community trading world the ... www.worldcommercereview.com agreements ever made explicit theirimplicitliberal understanding. oftheliberal understanding.acknowledgement At thesametime, itistruethat neithertheGATT northe WTO The liberal understandingpermeated theagreed properly, Indeed, itskeyinstitutionscannotfunction text. absent The GATT/WTO was notdesigned irrespective to ofitsregime accommodate state choice. onearth, eachandevery nothing’ approach impliesthat problems perpetuate. isalsoa-historical. It to Contrary Rodrik’sthe timeofaction. (2018)suggestion,theworld trading cannotstay community idle. This ‘do- againstChinawerebiggest victories scored intheareas where contractual expression hadbeenquite clear. is It Wu underscores (2016)correctly ofChinato isequallytruethoughthat evade thecapacity the itsdisciplines. It heterogeneity would argue againstsimilarexpectations. This isthetimeof explicit contracting. if there ever was one, that arelational asexpected. contract fullofgapswillfunction The membership’sWTO doingthis,In thetrading shouldnotrepeat community themistakesofpast. There isnoreason to believe, the relevance ofthe frameworkWTO inBeijing. multilateral regime candois ‘tweak’ afew keyinstitutions, whichwillfacilitate access to China’s andincrease market its economic regime andoverall approach by legislativeGeneva. fiat decidedin orthrough anedict What the The word trading shouldbeundernoillusionsasto community what canbeachieved. Chinawillnotchange The parameters progress to thegapbetween theChineseand bridge ispossibleintrying systems.WTO of theconcerns that emerge. Yet, aswe argue inMavroidis (2021),thisdoesnotnecessarily meanthat andSapir no As aresult, theworld trading isnow community stuckwithalegalframework that ishardly appropriate to takecare www.worldcommercereview.com two ofthisseries). and forced technology transfers to –thetwo biggestirritants trade andinvestment relations withChina(seepart Trade Agreement, NAFTA) contain enterprises (SOEs) detailedchapters regarding thedisciplining ofstate-owned rejected by Trump) Agreement aswell Free America astheUS-Mexico-Canada thesuccessor (USMCA, to theNorth Comprehensive andProgressive Trans-Pacific (CPTPP,Partnership thesuccessor to the TPPsigned underObamabut doingthis,In theworld trading would community bewell-advised to mimicexisting successful examples. the Both problem becauseofthenature ofwhat isat stake:subsidies, especially, require amultilateral approach. ComprehensiveChina dealortheEU-China Agreement onInvestment (CAI) may help a bitbutwillnotsolve the The world trading needsto community come together and ‘complete’ thecontract. Bilateral solutionsliketheUS- So, what done? be can deficit withChina. The agreementrisks being outlawed also by aWTO panel. And of course, agreement thePhase OneUS-China didnotsolve the ‘China problem’, nordiditreduce theUStrade tariffs. did barely flinch, butthat itisthe US economy that had to suffer thebulkof costoftheunilateral increase in Trump Administration. We now know, thanksto thework ofAmiti etal.(2019)andBown (2021),that notonlyChina The world trading would community bewell-advised to avoid repeating unilateral the asseenduring reactions former socialistcountries ofcentral andeastern Europe), theGATT/WTO agreements contain nosuchcriteria. toContrary theEU(whichaddedaccession –theCopenhagen criteria –to criteria prepare for theaccession ofthe www.worldcommercereview.com nations, andthat cooperation ispossible. theUS,andEU)showed by policiesandpractices Chinaposechallengesto(Japan, that many trade distorting negotiations. The questionishow to thisaboutpolitically. bring 2020Joint StatementThe ofthe January Trilateral For allthisto happenofcourse, allthemain playersWTO (China included) mustagree in to participate WTO But every silver lininghasatouch ofgrey would subside. thesepropositionsIf were agreed at themultilateral level, oftoday’s asubstantial part complaints againstChina againstitswishes. technology to itsdomesticpartner constrained not to enforce contracts between domesticandforeign that firms oblige the foreign investor to transfer Second, for foreign investment direct involving joint ventures, signatoriesWTO (China included)shouldbe proof inaccordance insubsidiesdisputes) andmustact with ‘commercial considerations’. clear that allSOEs(including, butnotexclusively, STEs)are presumptively ‘public bodies’ (reversing theburden of enterprises (STEs))are covereda smallsubset(state-trading by the Agreement.WTO The shouldmakeit newtext With thisinmind, we would liketo advance two proposals for reforms.WTO The first concerns SOEs, ofwhichonly EU, (2021)explain. asDadushandSapir is that Chinahasalready agreed onsomeofthisdiscipline initsbilateral investment agreement withthe (theCAI) solutions that meettheapproval ofasubstantial percentage ofthe membershipalreadyWTO exist? The goodnews For ‘Realpolitik’ reasons aswell, thisisacommendable approach: why attempt to re-invent thewheel, when www.worldcommercereview.com Contribution 09/21. (2021),“IstheEuropean Uand A Sapir Union’sDadush, investment agreement withChinaunderrated?”, BruegelPolicy International Economics. Bown, C(2021),“AnatomyWhy ofaflop: Trump’s phaseonetrade dealfellshort”,US-China Peterson Institute of Multilateral Perspective”, ATacit Project Paper, Geneva Trade Forum. Baldwin, RE, CBown, JFried, andTWatanabe ASapir AGonzalez, (2020),“Getting America A Backinthe Game: Paper 25672. M,SJReddingandDWeinstein ofthe2018Trade Impact Amiti, (2019),“The War onUS Prices andWelfare”, NBERWorking References a Professor at Universite Libre deBruxelles Fellow andaSenior at Bruegel Petros C Mavroidis is the Edwin B Parket Professor of Law at Columbia Law School, and André is Sapir And thiscurrent isnoexception.opportunities. crisis ■ Zoellick in2005(Zoellick ofState usuallygointandemwith (2005).Crises Robert Secretary the thenUSDeputy China shouldhave anincentive, therefore, asa to act ‘responsible stakeholder’ –aconcept already putforward elsewhere. problem’ continues to poisontheatmosphere at the –wouldWTO befelt probably inBeijing even more than has profited intheWTO. from enormously itsparticipation The cost ofnon-WTO –asmay happenifthe ‘China As argued by Baldwinetal.(2020),callsfor dialoguewithChinawillberequired astructured down theroad. China www.worldcommercereview.com here WTO.Editor’s seriesonChinaandthe two Readthefirst note: columnshere This and isthefinal column inathree-part China Relations, 21September. China?From to Membership Responsibility”, RB(2005),“Whither Zoellick, Remarksto theNationalCommittee onUS- ‘ChinaWu, Inc.’ M(2016),“The Challengeto World Trade Governance”, HarvardofInternational Journal Law 57:261–324. Standard ofAmerica’s Double D(2018),“The Rodrik, ChinaTrade Policy”, Project Syndicate, 10May. Press. WhyMultilateralismMavroidis, Matters, (2021),ChinaandtheWTO: PCandASapir Princeton, NJ:Princeton University . This article was firstpublishedonVoxEU.org. This article www.worldcommercereview.com Soeren identify HennandJames Robinson latent assets in Africa that bodewell for sustainedeconomic growth Africa’s latent assets www.worldcommercereview.com S By thesecondBy halfofthe18 Africa might have bad400years, bad200years. hadavery to prior 1978Chinahad at least avery better economic timesaheadfor 2021). Africa (HennandRobinson To seewhy thisisplausible, note that while ourresearch,In we identify three latent assetswhichwe argue suggestthat there different may bevery and much optimistic aboutAfrica’s development futures, andifsowhat are they? etal.2020)ordealwiththemountingRoessler challengesofclimate 2021)?Are change(Rohner there reasons to be the slave andPapaioannou trade 2013,Michalopoulos (Nunn2008)andcolonialism andRobinson (Heldring 2017, How willAfrica adjust to theCOVID pandemic(Arezki etal.2021)?Can itovercome thedeepnegative legaciesof which to buildaninclusive economy. market andtalented” (2003:138). are worthy sociological on principal outto turned beapowerful The ofmeritocracy norm couldprosperity bebuilt. Acentral onewas that, asocialnorm asConfucius putit, oneshould“promote thosewho But despite allthesecalamities, outthat itturned Chinahaslarge latent advantages, orassets, onwhicheconomic Great Leap Forward, andthenthe Cultural Revolution. as the Taiping rebellion. stateThe collapsed, Imperial there was rampant warlordism, aCommunist revolution, the system ofsocialinsurance withered away, theGrand Canal silted up, andChinawas convulsed by civilwars such which theauthorsargue are highlypropitious for itslongruntrajectory. that might havein asociety notbeenpreviously evident. This column identifies three latent assetsin Africa growth, andcantapinto 1978, canbesurprising suchasthat whichhappenedinChinaafter ‘latent assets’ ocial science research haspainted ofAfrica’s adismalpicture potential for sustainedeconomic growth. But th century, theQingstate was collapsing fiscallyandwracked by corruption. The granary www.worldcommercereview.com optimistic aboutfuture mobility. oftheworld. shows socialmobility expected Africa Africans to are bethemostsociallymobilepart alsothemost historical evidence andalsoseveral sources ofstatistical information. For example,data onperceived survey and historic Africa, evenIn slaves whohadthecapacitiesgotto thetop. We illustrate withethnographic and thisfact closely related to Chinesemeritocracy. The achievement isalsodeep-seated. basisofAfrican society Africa haslatent assetstoo, indeedthefirst we identify –that societiesareAfrican basedonachieved status –is of African society is also deep-seated also is society African of related to Chinese meritocracy. The achievement basis basis achievement The meritocracy. Chinese to related African societies are based on achieved status [...] closely closely [...] status achieved on based are societies African www.worldcommercereview.com in Latin andelsewhere. America lacks thenotionofa ‘redeemer’ (Krauze 2011)orcharismatic personal rulesocentral to theemergence ofpopulism isfulloftheanticipation ofmiss-rule, intheform often ofa theory ‘drunken king’ (deHeusch 1982),anditgenerally Western liberal democracies initsanticipation that politicalpower andpolitical willbeabused. African oral history The second latent assetwe call ‘scepticism ofauthority’. Unlikemany societies inEastAsia, Africa ismuchmore like themselves ofattitudes theytransmit inthetypes to theirchildren. Their opinions aboutthisare similarto thoseof peopleintheUS. We alsoshow that thesebeliefs manifest connections’. likely to say that theway to getaheadeconomically isviahard than work andthisismuchmore important and ‘luck arenetworks to critical people’s as Figure in fact, opportunities, 2 shows, in the consequences. For example, despite theclichéthat Africa isacontinent ofcorruption where andsocial connections Anticipated ofchildren socialmobility iseven higherthanthedata inFigure 1suggests. This hasimportant (Panel andeven thanintheUS. C) by theirparent’s income –asituation withhighsocialmobility. ishigherinAfrica thaninAsia socialmobility fact, In But, asPanel Ashows, for Africa thedata are spread everywhere. This shows that aperson’s income isnotpredicted clustered onthe45°line. income on thehorizontal axis. places withlittlesocialmobility, In suchasinLatin inPanel America B, thedata are Figure ofcomparable to plotaperson’s 1usesavariety surveys stated axisandtheirparent’s income onthevertical World Value, Africans are Survey more www.worldcommercereview.com Figure 1.Perceived by mobility region

Personal position 10 0 4 2 8 6 0 Panel A:Africa (Afrobarometer) 2 Parent position 4 6 8 10 www.worldcommercereview.com

Personal position 10 0 4 8 2 6 Panel B:Latin (Latinbarometer) America 0 2 Parent position 4 6 8 10 www.worldcommercereview.com

Personal position 10 0 4 2 8 6 0 Panel C:Asia (Asianbarometer) 2 Parent position 4 6 8 10 www.worldcommercereview.com Figure ofhard work 2.Importance versus luckandconnections, by region (World Value) Survey

% of respondents 1 =hard work abetter brings life; 10=hard work doesn’t matter, it’s aboutluckandconnections 10 20 30 40 10 20 30 40 0 0 1 1 2 2 Latin America 3 3 4 4 Africa 5 5 6 6 7 7 8 8 9 9 10 10 1 1 2 2 3 3 4 4 NZ, AUS Asia 5 5 6 6 7 7 8 8 9 9 10 10 1 1 2 2 North America North 3 3 4 4 Europe 5 5 6 6 7 7 8 8 9 9 10 10 www.worldcommercereview.com in thedifficult contextthat colonial powers bequeathed (Acemoglu Robinson, 2012). and Thus fartheseassetsare latent andwe donot underestimate thechallengesto buildingbetter institutions inAfrica 2020). ofothers(Kinzler perspectives andinlinewitharecentAfrican society literature insocialpsychology, ithelpsAfricans to takeandappreciate the and willingness ofAfricans to master somany languagesisindicative ofthegreat supplenessofcosmopolitan it may notbespecificallyadvantageousKikongo inNew to speakLingalaor London or York, Paris, theability One way we illustrate thisassetisby showing that Africa isthemostmulti-lingualcontinent intheworld. Though burden, whichmay betrueinsomespecific contexts, anasset.we argue that itisinfact can dealwithdifference andadaptwillsucceed. Though muchsocialscience attempts thisdiversity asa to portray We argue that thismakesAfricans themostableculturally to cope globalisedworld; withamodern peoplewho histories. This isreflected in languageswhereAfrican the word for ‘stranger’typically thesame is word as for ‘guest’. African society, Africans endlesslyhadto dealwithdifferences –different languages, different cultures, different The finalasset we identify is ‘cosmopolitanism’.Because of theheterogeneous andsmall-scale nature ofhistorical related ofpoliticaldevelopment to inAfrica. thehistory We illuminate thisby presenting data onattitudes inAfrica ruleandwe towards show how theseare one-man political institutions. in theUSat thetimeofConstitution, thisscepticism canprovide thebasisfor buildinginclusive andeffective This scepticism hasofcourse notstopped power Africa, butwe beingabusedinpost-colonial argue that, justas www.worldcommercereview.com Krauze, E(2011),Redeemers:IdeasandPower inLatin America, Harper. Kinzler, KD(2020), How You WhyYou It: Say Talk theWay You You, About Says It What Do?And Houghton Harcourt. Mifflin Henn, SJandJA Robinson(2021),“Africa’s latent assets,” NBERWorking Paper 28603. Heldring, LandJA Robinson(2013)“Colonialism inAfrica” andDevelopment de Heusch,L(1982),The Drunken King, or, oftheState, The Origin Press. IndianaUniversity Confucius Hackett. (2003) Analects, R,SDjankovArezki, andUPanizza (2021),ShapingAfrica’s Post-Covid Recovery Acemoglu, DandJA Robinson(2012),Why NationsFail, Crown. References Professor at theUniversity ofPublic ofChicago HarrisSchool Policy Soeren JHennisaPost-Doctoral Fellow, Innovations for Poverty andJames isa Action, Robinson China hasgenerated inthepast 40years. Here Africa may have systematic advantages over China.■ Moreover, many doubtthat thehegemony isconsistent of authoritarianism that withsustainingtheprosperity ofchallengesthat overcame Deng the type are larger thanthosethat face African leaders. Yet, thesefeatures alsohelpedimplement theGreat Leap Forward andtheCultural isnotobvious that Revolution. It These features Xiaopingmove onto helpedDeng apath ofreform. thecountry almostcertainly consolidated withacommon state system authority andsomethingapproximating ofwriting acommon culture. Moreover, theanalogyto of Chinaismadecomplicated that unlikeAfrica, by Chinahasalonghistory thefact , VoxEU.org, 10January. , CEPRPress. www.worldcommercereview.com This article was firstpublishedonVoxEU.orgThis article Rohner, Point D(2021),“Boiling inAfrica” Evidence fromspatial inequality: Africa” Roessler, P, YPengl, Titlow RMarty, KSorlie andNvan deWalle (2020),“Extractive colonial economies andlegaciesof Long TermNunn, N(2008),“The of Africa’s Effects Slave Trades”,Journal of Economics 123(1):139-176. Quarterly , CEPRPress.Asia Michalopoulos, SandEPapaioannou (2017),The Long Economic andPolitical Shadow ofHistory, Volume II:Africa and isdrivingthe‘African M(2014),“What MacMillan, growth miracle’?” , VoxEU.org, 6December. , VoxTalk, 22January. , VoxEU.org, 30August. www.worldcommercereview.com pandemic has created opportunities forpandemic hascreated changewhich opportunities would have beenimpossible before thepandemic We are at acrossroads. argues IanGoldin that the How thepandemic could save us www.worldcommercereview.com D 2020s. A century ago,2020s. Acentury that endedintears, withthe Great Depression, offascism and therise WWII. pandemic of1918and could wellWWI berepeated, asthepent-up desire to socialiseandspendcreates a roaring intheJazzAge Set oftheRoaring Twenties, oftheexuberance thedepiction following from thedevastating Why, ofcourse you can!” greatest danger, andrecalls thewords ofJay Gatsby inScottFitzgerald’s The Great Gatsby : “Can’t repeat thepast? entered into anewone. This willnaturally create andadesire anxiety to return to familiarterritory. This isthe First, though,we have to traverse ano-man’s-land; we are world buthave leaving theoldpre-pandemic notyet cataclysmic fate allows themto envisage abetter future, we now have the potential to create abetter world. offersRescue noguarantee ofabetter life, butitdoesmakepossible. Like refugees whose rescue from a appetite for andadesire fresh notto world. return thinking to thepre-pandemic andprotests 2020).Globalsurveys a sustainablepath (Schwab have andMalleret 2020,Zakaria demonstrated the event to reset that rescued ourlives humanity. andsocietiesonto opportunity hascreated It aonce-in-a-generation Despite thetragic deaths, suffering andsadnessthat ithascaused, asthe thepandemic could godown inhistory humanity, stop future pandemicsandbuildamore inclusive world ofshared prosperity. Sustaining andbuildingonthismomentum for reform isvitalifwe are to address challengesfacing thecritical would have beenimpossiblebefore thepandemic. of change, inwhichgovernments andcitizens have reforms demonstrated to which undertake theirability as theevent that rescued humanity. This column argues that thepandemichas created ahingemoment espite the tragic deaths, suffering andsadnessthat ithascaused, thepandemic could godown inhistory www.worldcommercereview.com to what hasalready beenprogrammed, whenwhat isneededadifferent operating system. as calledfor by the World Economic Forum, or ‘reboot’, anotherpopularphrase, cansuggestthat we shouldgoback forward’‘Bouncing implieswe are leapingaheadalongthesametracks whichleadover aprecipice. AGreat Reset, are worrying. similarly thatbe headinginthesamedirection brought usto thecatastrophe we are intoday. widelyusedexpressions Other arecentIn book(Goldin 2021),Iargue that that returning to asusual’,‘business or back’,‘bouncing meanswe would backisbad Bouncing historic choice confronting us confronting choice historic world or remain set in our dangerous ways is the the is ways dangerous our in set remain or world Whether we now commit to a new and improved improved and new a to commit now we Whether www.worldcommercereview.com functions largely onlineismorefunctions atomised andmay leadto ahardening ofsocialandpoliticalsilos. devastating thelives andlivelihoods ofmany and greatly increasing isolation andmental illness. Aworld that But thepandemichasalsoexacerbated healthandeconomic inequalitieswithincountries and between them, family,contributions andhaving ofscience supportive andexperts, and colleagues. friends positive changeshave beenadeeperrecognition ofnature, oftheimportance therole ofessential workers, the Changes that would have takenadecadeormore to emerge have takenplace almost overnight. Among the have seemedunattainable, even idealistic. to createpolicies andactions an inclusive andsustainable world ofshared prosperity. Before thepandemic thismay The tasknow isto thereactive turn response to thehealthandeconomic emergencies into aproactive setof are nolongercredible.inaction required to dosoandthat governments are ableto break outoftheireconomic strait jackets. Oldexcuses for new horizons. The coronavirus rupture hasshown that citizens are prepared to changetheirbehaviour when COVID-19 has shattered themental mirrors that have prevented usfrom from breaking thepastandembracing Appetite for change change andothercrises, we needto Isthispossible, changedirection. andinwhat way? To prevent future pandemics, whichcould bemuchmore deadlythanCOVID-19, andto stop catastrophic climate Building backonunstablefoundations guarantees future collapse. ifthere isonethingthat COVID-19worrying; hastaught us, itisthat foundations. oursystem isbuiltonshaky ‘Building backbetter’ presidential –thesloganusedby theBiden–Harris team –ismore encouraging butstill www.worldcommercereview.com from thefailure ofthisaptambitionto berealised. armistice that endedtheFirst World War was that a for heroes‘fit country to live in’ becreated agendas that focus oninclusive long-term objectives. Prime Lloyd Minister George’s the after 1918rallying cry owes whohasmadesacrifices abetterSociety everyone future. needs to betranslatedSolidarity into political protection equipment. catching COVID-19. Around theworld, thousandsofhealthworkers dieddueto theabsence ofeffective personal decadeandover athirdpre-pandemic offront-line workers feared that notenoughwas doneto protect themfrom revealed. fundingfor government theUK, starkly declinedby inthe In two-thirds healthandsafety inspections The intolerable andaculture costs ofausterity that celebrated thestate individualismandundermined hasbeen delivered, andthat rubbishcollected lights stayed on.Many sacrificed their own health for others. Essential workers placed themselves at to dailyrisk staffourcare homesandhospitalsensure that food was through COVID-19. The young sacrificed theirsociallives, education andjobs debts get took onenormous to helptheelderly We have ofsolidarity, witnessedanoutpouring notleastoftheyoung for theoldandofessential workers for others. ideological history. The ideathat there isnosuchthingassociety, onlyselfishindividuals, cannow be relegated to thedustbinof Pendulum swing Unless thenegative consequences ofthepandemic are urgently addressed, theywillcastalong, shadow. dark 1 . We need to learn www.worldcommercereview.com and ideasthat are urgently neededto rebuild countries and create afuture ofshared prosperity. countries would nothave access to theinternational vaccines, solarpower panels, investment, remittances exports, toIt that benefitfrom globalisation brings.would meanthat thejobs, citizens ofpoor ideasandopportunities Economic deglobalisation would condemn to thebillionsofpeopleinworld continuing whoare poverty yet change orany oftheother great threats by politicaldeglobalisation. globalisation, notless. We cannotstop aglobalpandemicwithoutmore globalpolitics. Norcanwe stop climate Globalisation hascausedthisuniversal healthandeconomic emergency. And yet, to address itwe needmore Globalisation faced by many that thispandemichassodevastatingly exposed’ etal.2021). (Johnson which threaten ofsociety, thefabric providing a thedisadvantages‘once-in-a-generation to tackle opportunity As NobelLaureate economist Angus Deaton hasargued ‘we now face asetofchallengeswhichwe cannotduck’ andprices, ofmarkets andheralds aswingofthepolitical pendulumbackto stateprimacy intervention. profound changesinourwork andhomelives. theendofneoliberal marks era ofindividualismandits It The pandemictoo willchangeeverything, from to globalpower. ourpersonalpriorities Already ithasbrought World War to gave theUnited Nations, birth Bretton Woods Plan. andMarshall Institutions affordable home, noneofwhich would have been available to mostofthembefore the war. Globally,Second the offering thesoldiers fromreturning Second the World War free education, healthcare, jobsecurity, apensionandan to ‘snatch from theexigencies ofwar positive socialimprovements’ The world wars forever changedglobalpoliticsandeconomics; Maynard Keynesargued that itwas necessary Learning from history 2 . In Britain andtheUS,thistranslated Britain . In into www.worldcommercereview.com could besounded. thisisfinallyheard, If to abettercould andprovide future.COVID-19 rescue humanity aportal that apandemicwasThe inevitableandwe fact failedto prevent orprepare callas for itissurely asloudawake-up prevention. one day in2020governments spent more responding to thepandemicthantheyhadinten years ofpandemic The pandemic hasshown that itismuchlesscostly to stop thanto acrisis respond to onethat israging. just In ourdreamswe andourimaginations. think, Nothing shouldbetakenfor granted. The virusisnotonlychanging butalsothe way ourpossibilitiesandactions, COVID-19 has tested us. passingthetest By we willhave proved we canalsoconquer climate andotherthreats. withthelives ofpeopleacrossare theworld, intertwined including thoseinthepoorest countries. we toIf learn work together to stop pandemics, we willhave learntto cooperate. We willhave learntthat ourlives Stopping globalcrises interest to contribute to thecreation of more cohesive andstablesocieties. country’s isinevery self-interestIt to cooperate to contain globalthreats. Similarly, itisineachofourown self- cooperation, ofsupremacy. rather thanassertions Now thethreat comes from forces that are beyond thecontrol andwhichrequire ofany onecountry international conflicts. external far from itwillonlyincrease reducing it. risk, The greatest threat to ourlives hashistorically come from internal or isolating ourselvesIf andstopping globalisation could insulate usfrom paying. itmay risk beaprice worth But www.worldcommercereview.com Zakaria, F(2020),Ten Lessons foraPost-Pandemic World, AllenLane. Schwab, KandTMalleret (2020),Covid-19: The Great Reset,Forum Publishing. P,Johnson, ReviewofInequalities: aNewYear’s IFSDeaton RJoyce andLPlatt (2021),“The message” EandDMoggridge (eds),Johnson, (1978),The Collected Writings Maynard ofJohn Keynes, Cambridge Press. University I(2021),Rescue:FromGoldin, GlobalCrisisto aBetter World Fitzgerald, FS(2000),The Great Gatsby, Penguin References Maynard2. John Keynes, “How to payforthewar”, andMoggridge (1978). inJohnson Lloyd1. David George, 23November 1918,cited by MarkCarney inThe Economist, 2020. 16April Endnotes isProfessorIan Goldin ofGlobalisation andDevelopment at theUniversity ofOxford confronting us. ■ Whether we now commit to anewandimproved world orremain setinour dangerous ways isthehistoric choice , Hodder. , IFSBriefingNote.41 www.worldcommercereview.com EU willhave widespread consequences. Stefanie Walter Switzerland’s talkswiththe decision to abandon InstA says future relations now depends bothontheEU’s Quo vadis,Quo Swiss-EU response andondomesticdevelopments relations? www.worldcommercereview.com S with theEU(andwhichat that timeconsidered afinalisedagreement). when theSwiss government launchedadomesticconsultation oftheframework onthetext agreement negotiated hasbeencontestedThe InstA ofnegotiations but becamemore inSwiss politicisedin2019, politicssince thestart Why didtheSwiss sideabandontheagreement? developconsolidate thebilateral andfurther path taken by Swiss-EU relations. and interpretation ofthebilateral agreements. The ofthe institutionalframework objective agreement was thusto market-access agreements andto provide adispute settlement mechanismfor any conflicts over theapplication The institutional framework agreement’s to goalswere allow for inparticular easierupdating ofthebilateral negotiations onabroader institutionalframeworkand theEUin2014started agreement. be updated continuously asEUlaw evolves. To puttherelationship onamore institutionalisedfooting, Switzerland While close, Swiss-EU bilateral relations are therefore complicated, notleastbecausethe multipletreaties needto research cooperation andfree movement. a tight web ofover 120bilateral treaties that allow for closecooperation onissuesasdiverse access, asmarket 1992,Swiss votersIn rejected European Economic Area membership. Subsequently, Switzerland andtheEUcreated What istheinstitutionalframework agreement? and where dorelations gofrom here? institutional framework agreement withtheEU. (InstA) What istheagreement, why didtheSwiss it, reject in thebalance theSwiss after government decidedon26May to abandonnegotiations onaso-called witzerland andtheEuropean Unionhave acloseanduniquerelationship, butitisarelationship that hangs www.worldcommercereview.com these theycould notberesolved andabandonednegotiations altogether. andresolve negotiations to theseissues, try theSwissAfter further government decidedat theendofMay that the EUcitizens’ andgive rightsdirective EUimmigrants (2004/38/EC) access to Swiss welfare. high wages, state aidruleswhichcreated problems for theSwiss cantons, andthequestionofwhetherto accept thoseconsultations,In three issuesofcontention emerged: guaranteed protection for Switzerland’s traditionally the contours of the new Swiss-EU politics to emerge to politics Swiss-EU new the of contours the It will take a few months for the dust to settle and for for and settle to dust the for months few a take will It www.worldcommercereview.com the idealscenario for Swiss-EU relations. positive, compared negatively. withonly16% whoviewed themsomewhat orvery For many Swiss, thestatus quois from February asurvey 2021,two thirdsIn ofrespondents said that thebilateral treaties were orsomewhat very bilateral treaties isexceptionally strong inSwitzerland. They are alsorooted inastrong preference for bilateral relations to remain astheyare today. for the Support decision onissuesasdiverse astaxreform ofcows, andthedehorning asmuchoninternational treaties. Swiss uneaseaboutgiving upsovereignty inwhichvoters democracy inadirect are usedto beinggiven thefinal However, thefundamental reasons for thefailure negotiations godeeper. oftheInstA They are rooted inastrong framework agreement. andrightmadeitincreasingly fromcriticism difficult bothleft forthe government to win a referendum onthe Although publicopinionpollshave thewidespread repeatedly theInstA, ofvoters shown amajority support growing from criticism business, whohave bilateral traditionally cooperation supported withtheEU. (especiallyany role from foropposed theInstA thestart inthedispute theECJ settlement mechanism)aswell as This to newoppositionemerged thestaunch,longstandingresistance next from therightwhofundamentally adamantly opposedtheframework agreement. closerrelationstraditionally withtheEU, supported thewage protection issuealienated trade unionswho politically problematic was that theysplitupthe traditional alliance pro-EU inSwitzerland. has While theleft ofthisdecisionhaveCritics pointed outthat thesethree issuesweren’t insurmountable. Butwhat madethem www.worldcommercereview.com partners.” interview and itseemsthegovernment, threat isthat thisisanempty While proponents inSwitzerland oftheInstA warnagainstthisscenario, thedominant viewamongEurosceptics, Horizon Europe. thelongrun,Swiss-EU cooperation In could fallfarbelow current levels. andarelegation security ofSwiss industries, researchers reduced status in electricity machinery to third-country relations hurdles to willslowly medium term thismeansnewcertification erode.for themedtech and theshort In theEUfollowsIf through onitsthreat ofrefusing to update existing agreements, thenthestatus quoofbilateral pursue thispath.problematic becausethestatus quocanonlybemaintained ifbothparties any existing agreements orconclude newonesuntil aframework agreement isinplace. For Switzerland this is Whether thesemeasures will safeguard thestatus quoisuncertain. The EUhassaidthat itisunwilling to update with EUstandards where nodomesticoppositionexists. Third, itplansto ‘engage inapolitical dialoguewiththeEU’. Second, itwillgoover allareas covered by thebilateral treaties to unilaterally update andalign domesticlegislation put onholdin2019whentheEUdeclinedto grant thestock equivalence. market to approve thepayment ofthe ‘cohesion billion’, moneyintended for cohesion measures incentral Europe that was The government’s immediate strategy consiststo ofthreeconvince elements: first, itwilltry the Swiss parliament relations basis. onabilateral, case-by-case Against thisbackdrop, that theSwiss itisnotsurprising government wants to consolidate andexpand existing Where are Swiss-EU relations headed?

“the EUwouldthat damageitselfby trading “the torpedoing trade relations withoneofitsmostimportant . President GuyParmelin argued inanewspaper www.worldcommercereview.com government to reengage withtheEU. have by parliament. Others overturned proposed signatures collecting for apopularinitiative that would force the before themotioncould bevoted on).Butitisunclear whetherthegovernment’s decisioncould andwould be Indeed, amotionispendinginparliament urging thegovernment to continue negotiations (thegovernment acted abandon negotiations was notthegovernments butparliament’s prerogative More generally, there hasbeen arange ofproposals ofwhere to gofrom here of anewpoliticaldialogue. Cohesion Funds, ontheextent to whichasubstantial updating ofdomesticlegislation ispossibleandonthemerits Unsurprisingly, views have are reactions dividedonwhetherSwitzerland variedwidely: should pay into EU between aEurophile andaEurosceptic camp. cleavagea cross-cutting withseveral mostnotablytheliberal democrats key parties, andthesocialdemocrats, torn Meanwhile, thegovernment’s decisionhasledto considerable domesticdebate. Swiss-EU relations into hasturned Thus, there isawidespread Switzerland expectation willbeableto continue onitsbilateral path withtheEU. ofEEAmembershipultimatelythe rejection resulted inafavourable andtailor-made agreement withSwitzerland. sceptics alsopointInstA to the1992experience, where despite concerns ofadeterioration ofSwiss-EU relations, Commission would bestupid’ to putgoodandregulated economic relations withSwitzerland at risk. on thegovernment’s chiefeconomist oftheSwiss trade unionfederation decision,DanielLampart, claimed EU ‘the Many believe that theEUisbluffingbecauseitbenefitsequally fromclose relations with Switzerland. Commenting . Some argue. Some that thedecisionto . www.worldcommercereview.com This article was firstpublished onBruegel This article of theCenter for International andComparative Studies and Political Economy ofPolitical at theDepartment Science at theUniversity ofZurich andDirector Stefanie Walter isaNon-Resident Fellow at Bruegel. She isalsoaProfessor for International Relations contours ofthenewSwiss-EU politicsto emerge. ■ Eurosceptics, mostnotablytheSwiss People’s Party. willtakeafew months It for thedustto settleandfor the government, theGreens Green andthepro-EU Liberals, may benefitpolitically. Butthemove could alsostrengthen Domestically, newalliances that are may form, notrepresented andthetwo mainparties inSwitzerland’s consensus countries. but itmay alsoharden feelings towards anEUthat isalready seenmuchmore negatively inSwitzerland thaninEU A non-accommodating EUresponse may highlight associated therisks withanerosion ofthebilateral treaties, What future Swiss-EU relations willlooklikedependbothontheEU’s response andondomesticdevelopments. accessloss ofEUmarket withamore competitive Swiss businessenvironment. there isapushfor sideofthepoliticalspectrum, conservative domesticreforms andmore deregulation to offset the the EU, includingEUaccession (anoptionthat isdeeplyunpopularamongSwiss voters) orEEAmembership. Onthe haveSome gonefurther, arguing that Switzerland now needsafundamental discussionaboutitsrelationship with www.worldcommercereview.com Multi-modal connectivity is poised to beagamechanger. connectivity Multi-modal Arnab Ganguly and Jithin Sabu onhow andJithinSabu theBBINis Ganguly Arnab game changer A connectivity A connectivity connecting to thriveconnecting www.worldcommercereview.com Total trade $67billion rather ofonly$23billion Asia goodstrade withinSouth could thantheactual beworth andtradea numberofinfrastructural facilitation challenges. isargued that thevolumeIt ofintra-regional trade amongcountries Asia inSouth islessthanitspotential owing to Intra-regional trade intheBBINsub-region products, amongothers. Bangladesh. These countries are for dependent onIndia supplyoffood grains andvariousessential agricultural Additionally, enjoys India atrade withtherest surplus of thecountries intheBBINsub-region, including andimports. exports country while BhutanandNepalare land-locked andare mostlydependent onIndia’s road, rail andwaterways for theirthird a combined gross andBangladeshare (GDP) domesticproduct India thetwo largest ofUS$3.5trillion. economies, The andNepal, BBINsub-region, comprising Bangladesh,Bhutan,India, ishometo 1.6billionpeoplewith nearly An overview oftheBBINsub-region time andcost ofdoingtrade, especiallyfor Bangladesh. These are thereasons why argued itisoften that itisabout Similarly, Figure 2highlights the needfor procedures harmonising for trading across borders soasto reduce the reveals countries that intheBBINsub-region are otherthanIndia, below theglobalaverage. (Figure differences. BusinessRankings significant1) andtheirEaseofDoing 2)underlines inter-country Figure 1 A comparative analysis ofcountries intheBBINsub-region interms oftheirLogistics Performance Indicators(Figure the BBINsub-region standsat merely four percent (Table 1). Asia, ofSouth isnoexception.BBIN sub-region, whichapart Presently, the intra-regional trade amongcountries in 1 . The www.worldcommercereview.com Source: CUTS’s calculations adopted from3) Methodology UNESCAP taken from trade andImports datapublishedby Governments ofNepal, onExports andColumns 2)Data BhutanNotes: andIndia. represent 1)Rows represent Imports. Exports Table 1.Intra-regional trade amongcountries (values inmillionUS$) intheBBINsub-region . 4)RoW=RestoftheWorld www.worldcommercereview.com logistics performance indicator performance logistics Figure 1.Comparative analysis ofcountries vis-à-visglobalaverage intheBBINsub-region basedontheir 1.0 1.5 2.0 3.0 3.5 4.0 2.5 Customs Infrastructure Bangladesh International shipment Bhutan competence India Logistics Nepal Tracking and tracing Average (global) Timeliness LPI score www.worldcommercereview.com Doing Businessrankings -trading across borders Figure 2.Comparative analysis ofcountries vis-à-visglobalaverage intheBBINsub-region basedonEaseof 1,000 500 600 900 800 100 200 300 400 700 0 compliance (hours) Border compliance Border (USD) Bangladesh Export Documentary Documentary compliance (hours) Bhutan Documentary Documentary compliance (USD) India compliance (hours) Border Nepal compliance Average (global) Border (USD) Import Documentary Documentary compliance (hours) Documentary Documentary compliance (USD) www.worldcommercereview.com several factors Trade intheBBINsub-region isheavily skewed toward roadways to facilitateEfforts cargo seamless movement: theBBINMVA company inBangladesh 15-20 percent lessexpensive for acompany to trade inIndia withacompany inBrazil orGermany thanwitha • • • artificially low trucking price low trucking artificially ofconsignmentsgreater inthedelivery predictability roadways provide seamlessfirstandlastmile connectivity 4 . Some ofthemare. Some asfollows: network could be created in the BBIIN sub-region BBIIN the in created be could network an efficient multi-modal transport connectivity connectivity transport multi-modal efficient an private players and civil society organisations [...], [...], organisations society civil and players private With the coordinated efforts from governments, governments, from efforts coordinated the With 2 . 3 . Suchaskewed modalmixcould beattributed to www.worldcommercereview.com countries by 30percent ofdevelopingimprovement canincrease infrastructure quality andtrade-related agricultural exports in transport A studyby theOrganisation for Economic Cooperation andDevelopment (OECD) hasfound that a10percent intheBBINsub-region connectivity ofmulti-modal Prospects developing multi-modalconnectivity. Japan International Cooperation are assistingthesecountries (JICA) by Agency providing broader frameworks in Nations Economic Commission andSocial for Asia andthePacific andbilateral (UNESCAP), agenciessuchas Multilateral development organisations suchastheAsian Development Bank(ADB), the World United Bank, Trial run underBBINMVA in2016 5 . transportation and digital connectivity initiatives. anddigital connectivity transportation through various establish multimodalconnectivity an increased momentum intheBBINsub-region to on theInland Waterways andRailways front. There is Meanwhile, commendable progress ishappening implement it. other three countries have decidedto goaheadand decided to to remain theBBINMVA, anobserver the 15, 2015. While owing to domesticreasons, Bhutan Vehicles Agreement (aFramework Agreement) inJune sub-region cametogether andsigned aMotor transhipment at theborders, countries intheBBIN To facilitate seamlesscargo movement andavoid www.worldcommercereview.com and business friendly logisticsand businessfriendly system. would globalinvestment also helpinattracting It global market. to thesub-region for creation ofmore economical andtransit timewouldReduced from cost make theproducts oftransporting thesub-region competitive inthe travel timeand/orthrough incost reduction pertonnage, orboth. to facilitatetransportation increased freight movement infreight andareduction cost, eitherthrough in reduction isanimperativemulti-modal connectivity to reduce thepressure onroadways andpromoting othermodesof Given theexcessive dependence onroadways for doingcross border anditsvariouschallengeslikecongestion, like BhutanandNepalwhichare for dependent exports/imports. onIndia theirthird country countries intheBBINsub-region. This iseven for more geographically important challengedlandlockedcountries Therefore, andlogistics networkscritical wouldbe efficient for transport promoting trade globallyandamong terminalMulti-modal inHaldia,India underconstruction www.worldcommercereview.com Roadways Following are somemajorinitiatives to promote intheBBINsub-region: multi-modalconnectivity dedicated freight corridors, digitisation oftrade initiatives, andadoptingreal-time system. cargo electronic tracking such asbuildingmulti-modalterminals, logistics parks, enhancingbilateral railway andwater connectivity, building thepotentialRealising ofmulti-modalconnectivity, countries intheBBINsub-region are now focusing oninitiatives initiativesOn-going inthepipeline andprojects roadways to waterways. the river bulkandbreak systems andBangladeshcould bulkcargo ofselect facilitate inIndia from amodalshift environment modeslikeinlandwaterways inthechain.For transport friendly example, better integration of would thesupplychainby alsohelpindecarbonising efficiently connectivity integrating transport Multi-modal byfrom gettingaccess theseamlessconnectivity to distant markets. andwomenfarmers entrepreneurs would benefitted andindirectly bedirectly inthesmalland mediumcategory wouldEnhanced bebeneficial connectivity likefastmovingfor sectors consumer goods, andclothing. textiles Local sub-region by better integrating clusters theindustrial intheBBINsub-region would networks alsoplay acatalytic upmulti-modaltransport roleSetting development inindustrial intheBBIN ofthesub-region. logistics performance by digitisation inthesub-region andautomation supported Adoption willupgrade ofmulti-modalconnectivity the • Construction of a bridge onriver ofabridge Construction Padma inBangladesh 6 . www.worldcommercereview.com Railways Coastal shipping waterways Inland • • • • • • • • • • • • Construction of railway line connecting Raxaul, India with Kathmandu, Nepal withKathmandu, ofrailwayConstruction India Raxaul, lineconnecting Project Rail inBangladesh –Khulna oftheMongla Construction (India) – Agartala (Bangladeshy) –Chilahati ofrailway (Bangladesh)andAkhaura Construction (India) Haldibari lineconnecting are arailwayBhutan andIndia fast-tracking in linkbetween Mujnai West andNyoenpaling inBhutan Bengal Augmenting inBangladeshwithadualgauge, oftheJamunaSetu doubletrack railway line Upgrading trade routes offour andNepalto six-lane important between India highways at Pasakha andPhuentsholing, ports Bhutan ofadry Construction Bangladesh Discussion onincludingadditionalPort ofCall intheCoastal ShippingAgreement and between India Bangladesh at Matabari, port ofadeep-sea Construction viainlandwaterways connectivity Facilitating andKoshiRiversto improve Narayani, Kaligandaki Nepal’s intheKarnali, water transportation Logistics ofMulti-Modal Construction Park at Jogighopa, Varanasi, inIndia andSahibganj andBangladeshinclusionoffive between India new of Call Port Renewal ofthePIWTT 8 7 www.worldcommercereview.com warehouse within25days. are confident that thecargo willbedeliveredand Bangladesh,theexporters/imports to the exporter’s/importer’s opined that even thoughtrucksface adetention of10-18days at border, thePetrapole-Benapole between India importer’s choice ofmode. For byoftheexporters/importers CUTS, majority example, undertaken inasurvey influencingan Predictabilityexporter/ thantimeandcost isa major factor ofcargo transportation, Other ofconsignments indelivery Predictability single voyage. amendments inthecustomsis essential procedures to makenecessary to allow sendingmultipleconsignments ina providersWhile the logistics and/orthefreight service well forwarding agents could play very thisrole, however, it tons. To encourage themto avail alternative modeswould require aggregators ofthecargo. whoavail roadways usuallytrading in100-150 oftheexporters/importers are smallexporters/importers Majority roadways, 50tons ofthesamecargo butitischeaperto viaroadways transport vis-à-vis inlandwaterways. the cargo issubstantial. For example, 2,000tons ofacargo itischeaperto viainlandwaterways transport vis-à-vis Transporting cargo viamodeslikeinlandwaterways andrailways becomes economically feasible onlyifthesize of Skewed modal mix which and suits problemthe requirement of cargo aggregation of small exporters/importers inthesub-region. forwith theright solutionsare establishingseamlessmulti-modalconnectivity important challengesaswell. comesThe withasetofpractical establishment ofseamlessconnectivity Addressing challenges Challenges andhow to address them www.worldcommercereview.com Petrapole border notmore inIndia, than400 truckscould enter theBangladesh side. This leadsto congestion at theborder crossings. For example, whileonanaverage, 2,000trucksarrive at the paymentsduty etc. hasbeendone for theconsignment etc. physical oftheconsignments whetherall by checking agencies, customs officialsand checking national security Cross border trade amongcountries intheBBINsub-region requires procedures anumberofat-the-border like Promoting off-border clearance andoperationalising theuseofElectronic Cargo System predictable. to makecargo movement scheduledservices gradually amongcountries intheBBINsub-region more start To thisend, there is aneedfor therespective national more governments pilotmovements to undertake and encourage more andmore players to avail railways andinlandwaterways astheirpreferred transportation. Therefore, there isaneedtoto incargo identify transportation andaddress affectingpredictability thefactors cheaper modesoftransportation. a majorchallengewhichmotivates traders to stickto roadways, even thoughrailways andinlandwaterways offer thecaseofrailways,In likeavailability ofrakes, factors availability oflineclearance etc. hasbeenconsidered to be stretches.select Together by inlandwaterways unpredictable. maketransportation thesefactors Bangladesh dependontidalforces. Ontop ofit, there are issueswith night navigation, and availability ofdepthin ismissing. thecaseofinlandwaterways suchpredictability In This isbecausethebarges and that plybetween India www.worldcommercereview.com modal logistics policy. shouldaimat uniformity infreightThis policy rates, standardization ofprocedures to avoid Therefore, itisessential that countries intheBBINsub-region come together andputinplace aregional multi- Furthermore, itneedsto be determined whowould beliable for damageorany delay indelivering cargo. suchascenario,In itisimperative that alltheagencieswork intandemto ofaconsignment. ensure timelydelivery multiple countries incaseofcross border trade. system, ashipment ishandledby amulti-modaltransport moreIn thanonestakeholder/company, that too across Coordination amongmultiplestakeholders providers.logistics service open trucksto closedtrucksby introducing appropriate fiscalincentives for the truck owners, and transporters, thisregard,In itisanimperative that coordinated eachofthenational governments undertake steps to convert andRFIDsealcould bechallenging.trucks anduseofETS to note here ofthetrucksplyingwithincountries intheBBINsub-region isimportant are that majority openbody It cross-border movement rights. address theconcerns ofnational governments totrucksgoingoff trackorviolating andcustoms officialspertaining Additionally, technologies Cargo likeElectronic useofsmart Tracking System andRFIDsealscould beusedto points. andthetrucksare allowed checkscould beundertaken customs to andsecurity movenecessary to theborder Such delays could beavoided by facilitating off-border clearanceInland at the ContainerDepots, where all www.worldcommercereview.com region cause delays attribute infreight to muchof thedelays transportation inCross Border Trade withintheBBINsub- cargo viaroadwaysWhile transporting have itsadvantages, however, poorroad conditions andtraffic congestion, Conclusions training to thepeopledisplaced byimparting redistribution ofmodalshares. requirementsspecific skill andstrategies gaps. to address should Suchinterventions consider options theskill for ofjobsthat are andthetype in thelogistics likelyto sector becreated for acomprehensive understandingofjob- Therefore, there ofadjustments likelyto studyto istheneedfor happen better understandthekind anin-depth livelihood isanimperative for creating apoliticaleconomy consensus to facilitate multi-modalconnectivity. Addressing allthestakeholderconcerns andproviding alternative livelihood optionsfor people wholosetheir jobsredundant.earlier modal mix. would createWhile suchre-balancing itwould newlivelihood alsomakesomeofthe opportunities, hasbeenargued that earlier facilitating greaterIt theexisting would entail re-balancing multi-modal connectivity Livelihood concerns provisions oftheBBINMVA. delays at theborder, andgradual replacement oftranshipment withtransit arrangements inalignment withthe (barring trade between India and Nepal) mandatory thereby andNepal)mandatory causingadditionaldelays. trade between India (barring Additionally, to there exchange are issuespertaining oftransit rights, whichleadsto transhipment at theborders 9 . www.worldcommercereview.com http://cuts-citee.org/pdf/dp-role-multi-modal-connectivity-in-fostering-value-chains-bbin-sub-region.pdf 3. . International Development in Focus; Washington, DC: World Bank. World DC: Washington, Focus; in Development International . Asia South Eastern in Integration Connecting to Thrive: Challenges and Opportunities of Transport Transport of Opportunities and Challenges Thrive: to Connecting 2021. Charles. Kunaka, Matias; Dappe, Herrera 2. Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0 IGO 3.0 BY CC Attribution Commons Creative License: DC. Washington, Bank, 1. Kathuria, Sanjay, editor. 2018. “ 2018. editor. Sanjay, Kathuria, 1. Endnotes ontrade, think- andaction-tank regulationsglobal publicpolicy andgovernance isaPolicyArnab Ganguly Analyst aAssistant andJithinSabu Policy Analyst at CUTS International, a sustainable growth andprosperity. ■ in theBBIINsub-region. There isnodoubtthat thiswillbeagamechangerinthesub-region’s achievement of concerns ofallthestakeholdersinvolved, network couldbe created connectivity anefficient multi-modal transport With thecoordinated from governments, efforts private players organisations, into andcivilsociety account taking andwell co-ordinated targeted interventions. undertaking number ofinfrastructural, procedural, challenges. Addressing andsocio-economic thesechallengeswould require However, amongcountries intheBBINsub-region requires facilitating multi-modalconnectivity addressing a the BBINsub-region. could beoneofthemoremodal connectivity viablesolutionsthat could facilitate seamlesscargo movement within Since progress withregard to operationalisation oftheBBINMVA outto process, isturning beaslow-going multi- Overview booklet. World World booklet. Overview Asia.” South in Trade Regional of Promise The Full: Half Glass A www.worldcommercereview.com Sunauli (India) to Bhairahawa–Butawal Road; and Suryabinayak–Dhulikhel Road. Suryabinayak–Dhulikhel and Road; Bhairahawa–Butawal to (India) Sunauli 8. Pathalaiya–Birgunj (Nepal)–Raxaul (India) Road; Dharan–Biratnagar (Nepal)–Jogbani (India) Road; Belhiya (Nepal)– Belhiya Road; (India) (Nepal)–Jogbani Dharan–Biratnagar Road; (India) (Nepal)–Raxaul Pathalaiya–Birgunj 8. 17.52km line between Hasimara in West Bengal to Phuentsholing in Bhutan. in Phuentsholing to Bengal West in Hasimara between line 17.52km Rangiya (Assam) to Samdrupjongkjar (Bhutan), a 23km line between West Bengal’s Banarhat to Samtse in Bhutan, and a a and Bhutan, in Samtse to Banarhat Bengal’s West between line 23km a (Bhutan), Samdrupjongkjar to (Assam) Rangiya Kokhrajhar (Assam) to Gelephu (Bhutan), a 51.15km line from Pathsala (Assam) to Nanglam (Bhutan), a 48km line from from line 48km a (Bhutan), Nanglam to (Assam) Pathsala from line 51.15km a (Bhutan), Gelephu to (Assam) Kokhrajhar 7. Feasibility studies for up to five rail links between Bhutan and India are being conducted. This includes a 57km line from from line 57km a includes This conducted. being are India and Bhutan between links rail five to up for studies Feasibility 7. industrial parks in Nepal; would be benefitted from the multi-modal transport network. transport multi-modal the from benefitted be would Nepal; in parks industrial in India; industrial estate in Pasakha, Bhutan; the fast-developing regions in North and North West Bangladesh; and and Bangladesh; West North and North in regions fast-developing the Bhutan; Pasakha, in estate industrial India; in 6. Industrial corridors such as the Amritsar-Delhi-Kolkata Industrial Corridor, and the Eastern Dedicated Freight Corridor Corridor Freight Dedicated Eastern the and Corridor, Industrial Amritsar-Delhi-Kolkata the as such corridors Industrial 6. https://www.oecd.org/sti/ind/interconnected-economies-GVCs-synthesis.pdf 5. 9. https://cuts-citee.org/pdf/Report-Connecting_Corridors_beyond_Borders.pdf https://niti.gov.in/writereaddata/files/document_publication/Freight_report.pdf 4. www.worldcommercereview.com results oftheDutch andconsider elections, thegrowth Fleur andPatrick de Beaufort interpret van Schie the in the support for the alternativein thesupport 'populist'parties The Dutch elections The Dutch elections and ‘populism’ www.worldcommercereview.com and apparently more interestingly –their exclusion ofspecificparties. outset themediasought to elicitstatements from theleadingcandidates – asto theirpotential coalition partners Even democrats theChristian changedtheirleadingcandidate thecontest during dueto circumstances. At the oftheirrank andfile, and support remained. responsible asaminister intheprevious inhiscapacity government), whileothersexplicitly secured the ongoing social democrats were urgently compelled to seekanewleadingcandidate (becausetheircurrent onehadbeen The fallofthe Rutte IIIgovernment was accompanied by thedemiseofoddkeypoliticalplayer andthe oftime.period Administration office wrongly accuse and prosecute the recipients ofchildcare allowances as frauds over alengthy inthewake ofasocialallowance Rutte)Prime fell Mark affairwhichsaw Minister on15 January the Tax and Customs themeantime, (thethirdIn cabinetof theexisting government parties coalition offour andcentre-left centre-right ofnewcompetitors. birth cooperation’. ensuedinthe Ontheright, conflicts weeks preceding which theelections, resulted insplitsandthe many years now, inrelation to theyagainbeat aboutthebushasiscustomary thecontentious issueof ‘greater have invain aboutcombining Party] Partij theirforces [Socialist andtheSocialistische beentalking Party], for (PvdA), –thePartij van where [LabourParty] deArbeid On theleft, GroenLinks three [Green-Left politicalparties were forelections remarkable variousreasons andtherun-upto themproceeded more messilythan ever before. chambers comprising theDutch sought parliament. aseat As inthenewSecondChamber. many as37parties The were March 2021thescheduledelections In heldfor theSecondChamber, ofthetwo whichisthemore important The background intheNetherlands to theelections www.worldcommercereview.com would notbeexcessively busy. coronavirus crisis, over ithadbeendecidedto staggertheelections three days to ensure that thepollingstations At amore level, alsoproceeded practical theelections differently from what was customary. As a result ofthe viewpointsextreme left-wing invariably went unchallenged. particular,In thishadalready beenthefate oftheexplicit right-wing flankonmore thanoneoccasion, while government without the VVD the without government will emerge, because it is impossible to form a stable stable a form to impossible is it because emerge, will ... there is a good chance that a Rutte IV government government IV Rutte a that chance good a is there ... www.worldcommercereview.com Chamber. anumberofcasesnewcomers In breakaways are actually fromsuchasJA21,whose existing parties, promotion (BIJ1) have ofafederal andanti-discrimination come Europe to berepresented (VOLT), intheSecond threshold the world withmerely oneseat intheLower House(representing asanelectoral 0.67%ofthevotes cast)serving that hasoneofthepurest theNetherlands dueto representation systems thefact ofproportional is partly in This meant that apost-war record represented. was achieved interms ofthenumberparties This large number total of150seats. managedto obtainasufficient numberof votesparties tosecure Second aseat inthe Chamber, which a comprises What results. isofcourse more oftheelection interesting First aspects isto examine anumberofstriking ofall, 17 The results interpreted ‘average’ by Dutch standards. of thefinaloutcome.In spite ofwhat circumstances,were extraordinary of78.7% theturnout could be termed that was some65,000votes reported It (ofthetotal of10,462,677ballotscast)were notcounted for thepurposes many theprocedure failedto observe properly, withtheresult that even thentheirvote was declared invalid. addition,thosevotersIn whowere olderthan70years ofagehadtheoptioncastingapostalvote. Nevertheless, Since then parties whichspecifically (50PLUS)focus on theelderly Since thenparties to secure aseat inparliament (Partij voor deDieren). focusing onanimal welfare was2006 theNetherlands thefirst inwhichapoliticalparty managed European country gainingaccess to parliamentispersisting. parties Partly asaresult In ofthis, thetrend single-issue toward so-called 1 . As such,itisrelatively to gainaccess to simplefor theSecondChamber. anewparty 2 , rural interests (BoerBurgerBeweging), the www.worldcommercereview.com parties have to whoareparties contend ageingthemost withsupporters ofvoters than15seats in2021.Asurvey hasalsorevealed failedto advance further that thesetraditional the party revivalA brief featuring scores inexcess of40seats was followed by adrop to alow point of13seats in2012, and initially begansomewhat withaprovisional earlier trough of29seats in1998. CDA [Christian whichalways Democratic Party]), achieved between 1922and1967,thedecline anabsolute majority theyhave thelasttwo elections failedtoIn winmore thannineseats. democrats thecaseofChristian (the In democrats (PvdA) usuallywon inexcess of40seats, withpeaksof more than50andtheodddeclineto 37seats. north and east of the country respectively), althoughtheywere andeastofthecountry forcednorth the to acknowledge in astheirsuperior VVD relative Friesland inseveral andthe majority rural municipalities, especially innorth-east Twente region (inthe The democrats, Christian whichwere inmostmunicipalities2002,managed to retain stillinthe majority their (D66 [Democrats 66]in2021. [People’s changedtheircolourNetherlands) to blue(VVD) dark for Party Freedom orlight green andDemocracy] ofthe municipality. Groningen (intheextremenorth-east Even bastions, thelastleft-wing suchasnorth-east hasalsofailedto emerge isthatWhat theleft asthelargest isalsoremarkable presence inany singleDutch of seats for years now, atrend at whichisalsooccurring theinternational level The ‘traditional’ have majorcurrents democracy ofsocialandChristian beenexhibiting adeclineintheirnumber internal division. founders theirbacksonexisting party, turned Forum voor Democratie [Forum following for Democracy], 4 . 3 . Between 1956and1998thesocial . Between www.worldcommercereview.com wing alternative’. This too occasions doubtaboutthe concept ofa victory’.‘liberal mostvoters infavour theirbacksonthetraditional thelastelections turned addition,during left ofD66asa In ‘left- persistent frequency. constitutional right to theinviolability oftheindividual’s own body, anditoptsfor more state with intervention For took theinitiative instance, to introduce thisparty legislation onorgan withthe donation which conflicts using thevague adjective, ‘progressive’, ithasadopted few liberal positions. of Rutte’s popularity. While itistruethat D66isusuallyviewed asliberal ininternational terms, andprofiles itself Moreover, thisyear thefallofgovernment seemsto have inJanuary failedto yieldany grounds for areduction thecoronavirus during pandemic. onliberty restrictions addition,Rutte that headedagovernment wasIn hardly whichhaspursuedapolicy liberal inthat itimposedstrict largely centredAs itscampaign such,theparty onthepersonofRutte intheabsence ofany explicit liberal message. manager. the right-wing liberal ispredominantly Rutte dueto VVD ofPrime asacrisis thepersistent Mark Minister popularity the questionremains as to whetherthismay ofliberalism. really becelebrated of asagenuinevictory The victory designated liberalThis (the isbecausetheparties andD66)together obtained moreVVD than58seats, although the Catholic southrespectively hasdissipated initsentirety. other municipalities. The democrat original socialand Christian predominance and inthelarge citiesandthenorth www.worldcommercereview.com power, and (d)anappealto and/or tieswithabodyofthought sourced from a ‘brown’ or ‘black’ past. leaderisat any rate(or thisishow presented) the party differently whowould doeverything ifthey were to seize such dissatisfied voters the comprise real peoplewhomthe ‘elite’ butcheats, nolongerserves (c) astrong leader attributed to itandare frequently cited are (a)playing upto dissatisfied voters, (b) presenting matters asthough what itentails. This isnottheplace to proceed withadiscussionofthematter, whichare althoughtheaspects whetherthere order isanyIn to ascertain questionof ‘populism’ onefirstneeds to determine amongst theseparties, ‘Populism’ ontheexplicit right? However, thisismisleadinginmany respects. are taggedas oftheseparties Most ‘populist’, appliedinthe foreign whichistheneagerly adescription media. good for 31seats and, assuch,islarger thanthetraditional left. Forum voor Democratie (FvD) isgrowing isprecisely –thePartij ofparties voor ontheright that acollection It de Vrijheid [Freedom (PVV), Party] issaidto besuffering.which thecountry This outcome inview oftheallegedly iseven more striking ‘neo-liberal’ yoke that isfrequently cited andunder wingintheDutch parliamentissmallerthanever,As such,the left ofalltheseats. noteven managing aquarter minor, ofPvdD, parties left-wing, single-issue VOLT than36seats. hasfailedto advance andBIJ1,theleft further than26seats. together oneaddsthe failedto advance If thetraditionalMore further parties to left-wing theleft 5 , JA21,Staatkundig Gereformeerde Partij [Reformed Political (SGP)–whichis Party] www.worldcommercereview.com Established in1918,theSGPisnow theoldestpolitical one mustimmediately treat theSGPasanexception. inthelight right intheNetherlands ofthesecriteria, onthe we parties If examine theabove-mentioned dissatisfaction. though theydeveloped anideologybasedontheir ‘populists’ ago, oftheirtimemore than acentury even whichare now onthewane,the parties were the democrats, thissensethesocialandChristian In of thenewcomers. political regime ormismanagedintheeyes neglected justified ornot)withmatters whichthedominant outfrom (whether dissatisfaction once started ortheirpredecessors All of theestablishedparties movements orparties. almost always applyinthe case ofnewpolitical would merely liketo notetwo that thefirst aspects them withaquestionabletendency. we thisrespect In is frequently cited circles inleft-wing inorder to align relevant academicliterature The are firstthree mainly sourced aspects from the 6 , while the fourth aspect aspect , whilethefourth www.worldcommercereview.com More importantly, voters cannotbecome amemberoftheparty, as Wilders isitssolemember quite simplysetuparound asingleleader. and theonewhichisalways categorised as ‘populistic andright-wing’ intheforeign media. hasbeen This party Still always representing more than10%oftheelectorate, Geert Wilders’ ontheexplicit right isthelargest party PVV asoppositionandisdisposedto accommodatingserve governments, albeitcritically. isprobably theonlyonethat hasnever beenrepresentedThe party inagovernment butwhichdoes notinitself politically’, albeitconstructively. to operate field.In parliament theSGPhasstarted with adistrustofstate inthesocio-economic intervention ‘more ideologysourced alsoespousesahighlydistinctive Calvinistic fromIt interpretation astrict, ofthebiblecoupled one ofthemoststableinNetherlands, consistently amounting to more than2%ofthevoters. inclined to testify baseis aspreachers from thepulpitthanaspoliticiansoperating support inthepoliticalarena. Its Calvinistic, extremelyorthodox anti-papal for many decades, andformerly more DutchThe party: SGPisatypically are older,democracy that currently espousethemare theparties younger. intheNetherlands. party While itistruethat thethree traditional tendencies ofliberalism, andsocial andChristian has its origins in the fear of the conflicts with which new parties are almostalwayshas itsorigins inthefear withwhichnewparties afflicted. oftheconflicts other party, Wilders members. allofhisfellow alsopersonally helpsto select parliamentary This desire for control 7 . More sothaninany www.worldcommercereview.com democracy’ andtheremedy was supposedto bemore democracy. direct (FvD) andits leader, original agendawas twofold. Baudet. Its Thierry were as The characterised otherparties ‘cartel For approximately five years there hasbeenanewcomerright-wing namely, onthe flank, Forum Democratie voor homosexuals. Traditionally, theextreme right, haslittlesympathy for thesetwo groups. constitutes athreat to traditional Dutch freedom, ofwhichheexplicitly inrespect refers to therightsofwomen and Firstly, andiseven heisnotanti-Semitic explicitly pro-Israel. Secondly, hisargument contends that Islam However, Wilderstwo definitely distinguisheshimselffrom in traditionally right-wingrespects. extreme parties criteria. oftheabove-mentioned consider thefourth andhisadmiration linksto for extremeright-wingHis parties ‘strong leaders’, and Putin, suchasOrban causeoneto sometimesperceivesomething whichMuslims to beprovocative and insulting. and thepresence oflarge groups in ofMuslims Western European countries. Wilders isvehement andexplicit, The question asto isjustifiedcloselyassociated whether thisdescription withone’s own assessment ofIslam oreven discriminatory ‘racist’. highly religious of his beliefs is this essential which causes many aspect Muslims. It of his opponents to brand him as He views Islamas anideologythat ishostileto Dutch values andwould therefore liketo reduce thenumberof concern. comes to hisprimary comprising sociallyandeconomically disadvantaged voters. orneglected Yet Wilders isuncompromising when it Wilders isrelatively appears base to listen flexible in to apotentialrelation support to issuesandhisparty various www.worldcommercereview.com Baudet, isthefirstfactor. had to contend withamajorbreakaway onthree occasions history. inits brief The personofitsleader, Thierry However, FvD isfrequently hasalready unfavourably portrayed inthenews becauseofthree andtheparty factors representation ofvoters whoare ‘not heard’. the Netherlands’ –featuring opensystem representation ofdemocracy pure proportional –offers scope for the ‘established parties’ devoted insufficient attention oftheelectorate at totheminthe eyes ofpart any rate andthat that thereThe fact was abreeding whichexpressed ground such concerns for isalsoanindication that the aparty expressing concerns whichare shared clearly withintheDutch electorate. Whatever conclusions onewishesto draw is inthisrespect, theyare legitimate positions andinthemtheparty to whichare reduce deemedtoand policy activities bepolluting. thosefarming associated withthis, to sensitive matters, ofincreasingly suchastheerection more inthecountryside windturbines A third issuewhichFvD hasusedto profile itselfemerged at alater stage:opposition to climate targets and, closely the EU. matters through referendums, includingthequestionasto shouldremain whethertheNetherlands amemberof istheremedy thiscasetoo that democracy isoffered. direct In The voters mustbeable to express theirviews onEU come to beunderthreat. of itsagendaliesinFvD’s viewthat European integration hasgonetoo far, withtheresult that thenation state has populist sentiment, brought withitwhenentered theDutch politicalarena 55years ago. The second component that isviewed asaneminent exampleThis ofanti- similarto component what D66,aparty ofitsagendaisvery www.worldcommercereview.com agenda without making any wild statementsagenda withoutmaking andto dosoinaway influence inwhichithopesto onitspolicy. exert months before theLower inMarch 2021. House elections claimsthat itwishesto highlight FvD’sThis party original Aversion led twoto abreakaway to factors thefirst oftheabove-mentioned from FvD to establishJA21several 200 deceased Dutch citizens whowere onboard Flight MH-17. national interests, that itissocasualin itsdealingswiththeinterests ofthealmost itisremarkable ofthesurvivors messages,electronic thispositionis(also?)linkedto RussianfundingofFvD. the that For claimsto support aparty Baudet issympathetic to Russianpropaganda to thiscrime Ukraine.According whichascribes to leakedinternal of 2014was indeedbrought down by rebels. pro-Russian Flight MH-17,anaircraft withmainlyDutch passengerswhichwas shotdown above inthesummer eastern Ukraine behaviour. The mostdistressing withintheDutch context isthat Baudetconstantly raises doubtsasto whether A third liesinhisundisguisedadmiration factor for Putin to deny andhistendency orcondone aggressive Russian whitesuggest abeliefinsuperior race, provided isdeemedto that be itsconduct ‘masculine’. distance himself from them.More to thepoint, onmore thanoneoccasion hehasalsomadestatements which Related to –isthat this–thesecond andBaudetdoesnot racist factor statements regularly occur withintheparty difficult, becauseBaudetissomewhat capricious. wherewithal to memberswhodonotadmire secure himuncritically. theloyalty offellow party The situation ismore He doesnottolerate occurs more inpolitics, opposition,whichnevertheless often andhedoesnothave the www.worldcommercereview.com up until know – without there being any clarity as to which parties would constitute part ofthenewcoalition. would –withoutthere constituteup until know beingany asto part whichparties clarity Whattwo isunusualthat thefirst months elapsedbefore the formation involved any substantive matters and – The formation oftheRutte IIIgovernment took arecord numberof225days. Since theSecond World War the formation ofanewgovernment hastakenmore thanthree months onaverage. purpose. The formation ofanewgovernment cantakealongtime, are becauseincreasingly required more parties for this Three anewgovernment prospect. theelections months isstillafar-off after This isnotunusualintheNetherlands. Towards anew government willbeableto live upto this.whether thisparty possible to say thisnow, JA21isapotentially non-populistoutlet for dissatisfied votersright. onthe Time will tell says at theoutset. agreat have As suchandinsofarasitisalready notprecluded dealthat otherparties thisparty According to somepolls, italready commanded doublethenumberofseats It twotheelections. months after seats. most ofwhomhave come from the andCDA ratherVVD thanFvD andthePVV, to enter theLower Housewiththree able to live oftimeithasmanagedto period upto convince withinabrief thisclaim.Nevertheless, enoughvoters, awaits toIt beseento what extentthisparty, many ofwhosememberswere alsoamemberofFvD until recently, is inclined too much to theleft. home for thosevoters whoare oftheopinionthat theliberal right-wing democratic andtheChristian CDAVVD are This newcomer relies ona ‘conservative, liberal’ explicitly claimsthat itwishesto bodyofthought. provide It a www.worldcommercereview.com 4. ‘TK2021 naardemografische enandere kenmerken’[The4. ‘TK2021 2021 Lower Housebasedondemographic andother than thetraditional parties. together, whereas thatfigure hadshrunk to 310,000in2021. The minor(new)movementsrelativelybetter areperforming amounted to more ithappens, whentaken ofallthe political than780,000members 3. As themembership parties leading candidate, LianedenHaan,on6May2021following aconflict. isnolongerformallyrepresented2. It intheLower House, ofits stilllocally albeit andintheSenate, thedeparture after electoral to threshold 5% (Germany, from varying 2%(Denmark) Poland, Belgium, mostothers). way1. By ofcomparison, mostofthe European representation countries whichhave have asystem an ofproportional Endnotes TeldersFoundation isResearcher Fleur PatrickDr andDr deBeaufort oftheDutch liberal vanisDirector Schie thinktank of addressing themajorissuesfacingcountry, asinthecaseofother Western nations. ■ Voters are beginning to tire ofpoliticianswhohave beenpreoccupied withholdingeachotherto account instead willagainresultseeking, inRutte’s trumpingitscompetitors byVVD alarge margin. stable government withoutthe VVD, whilepollsreveal that whichsomelosersinMarch newelections, may be thereNevertheless, isagoodchance that aRutte IVgovernment willemerge, becauseitisimpossibleto form a that arewhere rival to the parties sought to settlescoresVVD withRutte, whowon theelections. An leakedstatement unfortunate madeby Prime Rutte Minister occasioned extensive debates intheLower House, www.worldcommercereview.com consists of...Wilders. 7. Informalterms there are Wilders, ‘members: two theindividual, andalsoafoundationwhoseexecutive Geert board and Jan-Werner Müller, (Philadelphia, ispopulism? 2016). What numerous6. See publications, eg. Cas MuddeandRovira Kalwasser, Populism: (Oxford, Introduction AVery Short 2017) the HagaGroup andtheFvD shrinkto five seatsinthe leader, Baudetsawhisparty Lower House. Thierry 13May2021FvD5. On again hadto contend withabreakaway, asaresult ofwhichthree of thefive seats will continue as andere-kenmerken/ characteristics], whichwas consulted athttps://maurice.nl/peilingen/2021/04/11/tk2021-naar-demografische-en- www.worldcommercereview.com BVI asaninnovationBVI andinvestment hotspot across the From centre atraditional financialservices to aglobal fintech hub, theemergence Simon Gray ofthe charts transformation The fintech BVI fintech anddigital space www.worldcommercereview.com T is also intended for a varied and expanding range of financial services and banking applications, is alsointended for asdigital and banking banking avaried andexpanding range offinancialservices The sandbox regulatory is currently businesses. providers accessible to andfinancial start-up services BVI The facility testing are affordedBVI withoutalicence. 18months business inthe to conduct forthe product essential compliance requirements. withlegalandregulatory Companies undergoing sandbox testing,But intandemwithefficiency thesandbox BVI toassess enablesthe Commission(FSC) Services Financial improvements. The sandbox ofnewfinancial tests theoperational products, problems,detecting efficiency and envisioning services. testing of ‘innovative fintech,’ which refers to technology that creates, enhances, orpromotes or financial products to succeed inanincreasingly digitised globalcommercial environment. This framework regulatory facilitates the The sandbox was providers developed inanticipation andinnovators oftheneedsfinancialservices striving standards.regulatory was conceived fintech innovationcomply with to that support whileensuring digital andservices products One oftheBVI’s mostsignificant innovations regulatory to dateBVI isthe Sandbox. FintechRegulatory This initiative innovationRegulatory ease ofdoingbusinessandagrowing talent poolacross thefintech anddigital space. arebusinesses inthesector recognising theadvantages attracted by oftheBVI, fit-for-purpose regulations, by ofseveral thearrival exciting andproviders fintech start-ups over thelast few years.Increasingly, he British Virgin isemerging Islands(BVI) asaglobalhuboffintech innovation andinvestment, evidenced www.worldcommercereview.com evolving provision withthebest. regulatory by benchmarking progressive hubfor digital assetcentred opportunities. This standingissetto continue through theBVI’s culture of offintech throughThe thesandbox support regulations initiative has contributed BVI’sto the reputation asa at the centre andwiderfinancialservices ofthejurisdiction’songoing digitisation of banking offering. The sandbox represents strand anotherfuture-focused oftheBVI’s innovative puts It framework. regulatory inthewake oftheCOVID-19 andcredit crisis. services banking and credit applications are sector to expected feature strongly inresponse to callsfor more advanced virtual technology development is only set to grow to set only is development technology services centre as a global hub for financial financial for hub global a as centre services The position of the British Virgin Island financial financial Island Virgin British the of position The www.worldcommercereview.com currency oreven cryptocurrencies. currency funds by issuingthecoin ortokens in return onablockchainnetwork for investment intheform ofconventional fiat Tokens are issuedthrough Coin (ICOs) Initial Offerings Initial or Offerings (ITOs).Token The tokenissuerwill raise Working hard to positionitselfasafintech hub, ofchoice BVI becamethejurisdiction for the token generation. provision to service therapidlyThe ofquality growing isalsofocussed BVI onthedelivery digital assetsmarket. assets Digital for generation ofdigital thenext disruptioninbusinessregistration. Autonomous Organization (LAO), whichisessentially aDAO withinacorporate wrapper. LAOs represent amodel To address suchproblems, theDAO concept hasprogressed into generation form, anext theLimited Liability of funds. toincluding vulnerability fraudulent attacks that threw inturn up difficultquestions regarding liability fortheloss A keyproblem withfirstgeneration DAOs was rooted intheir lackofclearlegalbasis, which resulted inissues a DAO by ismadeelectronically acomputer code orthrough thevotes ofitsmembers. DAO are theorganisation defined activities by rulesthat willtake. decideontheactions within The decisionmaking company. Organization (DAO) withinacorporate –withlegalstandinginvariably structure asalimited structured liability AutonomousLiability Organizations (LAO). ALAO isadigitally organised business–aDecentralized Autonomous Examples offuture fintech developments suchastheLimitedcontracts to thepromotionextend ofsmart Evolving fintech www.worldcommercereview.com assets. The FSCwillberegulating VASPs soon. basisto assesshow itshouldbeappliedinrelation to tokens,on acase-by-case andotherdigital cryptocurrencies, been introduced, legislation assetsexamines eachmajorpiece guidance financial services the BVI ofBVI for virtual where specific Unlike someotherjurisdictions regulations in relation to digital assetsand haverelated activities 2020. a progressive approach asoutlinedinitsGuidance ontheRegulation of Assets inthe British Virtual Virgin Islands toCommission theregulation (FSC) tokens, ofcryptocurrencies, andotherdigital assets. The FSChaschosen BVI innovation for isdemonstratedThe instinct services BVI by theapproach takenby Financial theBVI Services maintenance, are amongarange ofadditionalbenefits. and maintenance rules, low incorporation andannualcompany maintenance costs, andefficient company company addition,arange ofotherjurisdictional laws,In theBVI’s taxneutrality, theabsence ofcapitalcontrol (BCA). and inthemodern commercially enshrined BVIBusinesscorporate minded Act Companies and efficiency flexibility The BVI’s range oflegislative advantages andterritorial benefitsmeanthatBVI companies benefit from the become an ICO hubofchoice over otherfinancial centres. companies asICO issuervehicles. The advantages offered BVI by company registration hasseenthejurisdiction The hasstriven BVI to become aforce inthenewcapitalraising wave, whichhasledto increased interest inBVI investment andotherblockchain-baseddigital assets. fundsfocussed oncryptocurrency The subsequently BVI expanded itsoffering from token generation into related areas suchas token exchanges and www.worldcommercereview.com incubator fundwillneedanadministrator. flexible and may operateis very withoutappointing acustodian, investment manager, orauditor, butunlike an exceeding US$100million,requires andhasanevergreen nominimum subscription, duration. An approved fund The Approved BVI Funds framework facilitates amaximumof20investors, anaggregate maximuminvestment not managersto comerequirements to faster market crypto andmore seamlessly. soasto enablestart-up significant administration whereasBVI incubator the costs andhighlevels fundminimisesinitial ofsupervision, hedgefundmanagersare attracted to often asoffshore thisstructure Crypto to fundsaretypically subject fundtype. crypto-asset converting theIncubator Fund to amore works sophisticated well fund product. It for thegrowing fintech and This appealsto product theincreasing to gainatrack numberofpioneermanagerswhoare record looking before minimum initialinvestment ofUS$20,000,and net assetsofupto US$20million. The regime asthe hasbecome known ‘20-20-20 fund’ dueto itsstructure, which takesamaximumof20investors, a proved vehicles to –many beidealfor term crypto ofwhichare light-touch, alsohedgefunds. short globally. launcheditsIncubator andApproved 2015,theBVI In Funds regimes. The IncubatorFunds BVI regime According to figures hedgefunds currently fromBVI isnowPwC, the inplace home to oneinsixofthecrypto intheworld,markets featuring inthetop five geographical markets by USdollardenominated trade volume. The BVI’s innovative approach become to oneof thelargest regulation cryptocurrency hasseentheterritory Innovation andsupport www.worldcommercereview.com (Banking), theIAIS(Insurance), IOSCO(Banking), (Securities, Investments, andFunds), theOECD(Corporate Governance), as To thisend, Financial Commission theBVI follows Services oftheBasel Committee principles theregulatory essential to safeguard growth through adherence to international standards. The believes BVI that at atimeofunprecedented digital proliferation, changeandopportunity, itis industry Safeguarding growth to providers corporate solution essential through service support for theircustomers. acost-effective banking The bankrepresents oneofthejurisdiction’s contributions mostdirect to thedigitisation offering ofglobalbanking, oftheAsian to market thejurisdiction. institution signifying theimportance focus brought abouttheestablishment oftheBankAsia in2014, whichwas intheBVI launchedasafullydigital centre successThe through financialservices hasnurtured BVI diligent attention to theneedsofits companies. This Adapting to market needs top hedgefundsprovision. globalhubsfor crypto oftheBVI’sThe popularity innovative fundingregimes positionasoneofthe has helpedto secure thejurisdictions onbusiness.recognised to prior by carrying Financial Commission theBVI (FSC) Services pools investor interest fundsandissuesproportionate calculated onthenetassetvalue ofthefund. APIFmustbe A private investment fund(PIF)isacompany, limited partnership, unittrust, orany and otherbodythat collects funds, includingprivate andventureclosed-ended equity capitalfunds. launcheditsPrivate 2020,theBVI In Investment Funds regime, whichbrought framework anewregulatory for www.worldcommercereview.com bureaucracy, regulation to safeguard acts smart success. international standards insafeguarding innovation andgrowth. thanstifleenterprise withunnecessary Rather istheBVI’sJust asimportant ontheessential role example to ofregulation other jurisdictions andmeeting finance asafacilitator for innovation andinvestment ever more relevant. The acceleration inglobaldigitization resulting from theCOVID-19 pandemicwillmaketherole inglobal oftheBVI commitment to legislative innovation at andservices atimeofexponential digital andfintech growth. forThe asahighlysecure BOSSsystem essential businessdata. depository acts The BOSSisindicative oftheBVI’s information relating to in-scope entities theyrepresent. The requires Act registered BVI inthe to firms create agents a andfinancial service database ofbeneficial ownership SecureSearchOwnership SystemBeneficial (BOSSs)in2017. Act To demonstrate itscommitment further to operational andaccountability, transparency created theBVI theBVI markets. This adherence to standards safeguards investment ininnovation, companies, BVI theterritory, andwiderbusiness terrorist financing. well to asadhering recommendations by theFinancial Action Task Force (FATF), to combat and moneylaundering www.worldcommercereview.com Simon Gray isHeadofBusinessDevelopment andMarketing at BVI Finance centre asaglobalhubfor financial technology development isonlyset to grow. ■ The Sandbox example of theBVI thispoint. underpins The positionoftheBritish Virgin Islandfinancialservices www.worldcommercereview.com for money. Graham Bright seesblockchainasanenabler inthe Cryptocurrencies haveCryptocurrencies foreshadowed apotential digital future growth ofthefinancial system and digital money cryptocurrencies The future of www.worldcommercereview.com F And onequote captured thesentiment: stable alternative are to suspect. fiat clearly currency that theopinionsofafew suchthat beingaviablelongterm individualscanspookmarkets any thoughts ofcrypto From heights ofBitcoin valued thelofty recently at $60000crashing nearly to $31,000inamatter ofdays, itappears currencies. of crypto After afew tumultuous weeks, there inperception, hasbeenafundamental shift value, andsustainability security for somany. value andtrustincrypto fluctuation, However, rarely have thevagaries, personattitudes, whimsandcomments ofsofew radically influenced the mechanisms for international for trade transactions sometime now. In fact, cryptocurrencies and networks suchasRipple andnetworks cryptocurrencies fact, In incorruptible recording quickly, andfacilitation ofglobalfinancialtransactions cheaplyandsecurely. secured As acryptographically services. decentralized ledgersystem, itisideally suited to thetransparent and Despite this, theblockchaintechnology behindthemhasrobustly demonstrated itspotential for useinfinancial outside thetraditional globalfinancialsystem andaren’t legal tender likecash issued by governments. Cryptocurrencies suchasBitcoinCryptocurrencies have foreshadowed apotential digital future for money, thoughtheyexist currenciesastronomical were digital bull market, (crypto) relatively obscure andonlyfor speculators. rom theirinception 2010s, intheearly until to theirmeteoric rise famein2017onthebackofBitcoin’s 1 andRippleNet 2 have beenusedasalternative settlement www.worldcommercereview.com Pound, sotherecent have tweets ofElonMusk hadaprofound effect. UK government to withdraw from theexchange rate mechanismandrequiring theBankofEnglandto prop upthe Just asinthe1990’s sterling, whenGeorge Soros famouslyinfluenced dynamics moving market by shorting the for arestaurant meal, thenitislikely to remain justaplayground forgeeksandgamblers.” “Unless anduntilBitcoin can usedto accepted be buyasandwich,orbe by your friendswhenyou paythemback becoming commonplace becoming favour of plastic, we will see more crypto currencies currencies crypto more see will we plastic, of favour As cash ceases its grip on day-to-day transactions in in transactions day-to-day on grip its ceases cash As www.worldcommercereview.com services. have andMalta Ukraine agreater understandingandoperating infrastructure to compete withandsupplycrypto leaving theUKbehindwithoverbearing legislation ofcrypto. Even andbasis lackofeducation ontheimpact The biggest exchanges intheworld are intheUSA,Japan(andChina,before thegovernment bannedthem), To avoid missing outonpotential revenue streams, banksneedto beinvolved, butalsoneedto exercise caution. bankswillnotbecompetitiveframework, versus more agile alternative financialproviders infuture. of traditional banks, moves andwithoutactive to create anoperating environment insideatight regulatory but by cryptography, giving andanonymity. itcomplete security operates outsidetheanaloguepreserve It accessible currency viatheinternet, itisregulated isavirtual notby anational regulatorSince cryptocurrency Why arecrypto? banksandfinancialfirmsembracing Little wonder traditional financial organisations andgovernments need to takestock. enabling globalfundstransfers inminutes, notdays. different payments and tokens inoperation, are cryptocurrencies crypto fast, cheap, secure, witheasyset-up, Overcoming thesetwo hurdles willputdigital currencies onthe firmly road to mainstream, andwith over 4,000 component isarelatively ofa reliable currency stablevalue. volatile animportant remain even withhugeprice very fluctuations withinasingle day; cryptocurrencies But problems are stillapparent, namelyalackofsoundlegalframeworks withnoway to enforce debtsand, www.worldcommercereview.com giant IBM. holdsmore reportedly Bank ofAmerica blockchain-related patents thanany othercompany, even beating tech Positioning iseverything, andwhilsttherole offinancialand technology companies becomes increasingly blurred, all transfers are fast, easyandinexpensive. correspondent complex arrangements, international withthecost banking andtimeimplications ofsuchservices, asset inapublickeyinfrastructure prohibiting fraud, copy ormisappropriation. Also, astransfer doesnotrequire Secondly, ofsecurity, buildingonalegacy cryptography where bankscanoffer the benefitsof in the protecting exchange into andoutofaccounts seamlessly. card stored or towallet, fiat usingmobile from currency technology, onamemory crypto iteasier to making Key points includeassistance that withimmediate, willenablebanksto participate simple, transparent exchange profit andacharge such ascrossfor additionalservices, border transfers. These organisations rely onmanagement andcontrol withtheaimof withina given offiat currency jurisdiction, accessibility andchoice are available for ofinvestors alltypes andclients. isalldown to controlIt ofassets, approach andbanksneedto takeapro-active technology, to underlying ensuring ofLondonCity andthenationatcentre ofa‘reputable andsafe’ financialmarket.” As stated by theLondon Stock Exchange UKgovernment inorder “the to needsto place understandcryptocurrencies policies to regulate thetechnology. financialcapital, withthefirstissue todevelop itselfas thecrypto The UKneedsto upitsgameto re-establish www.worldcommercereview.com subject to eitherincome oracapitalgainstax. subject commerce, casesare already emerging oftheIRSchasinginvestors over trades andprofits, non-reported it making asmediumofexchangeWhilst traders inthenatural usecryptocurrencies for course of basicgoodsandservices and revenue, taxingany fiat moneyusedwhenbuying, selling, or exchangingtokens. virtual measures. regulationrevenue-generating exerting By inthisarea control canprevent authorities lossofmonetary methodto regain controlA primary isthepower oftaxation, always amajorweapon inagovernments’ of armoury quite different. Africa. AndSouth withthesedifferent cultures, acceptance, handling, across and theglobe areregulation ofcrypto adoptionhavehigh rates alsobeenrecorded ofcryptocurrency indeveloping countries, like Vietnam, Turkey and Ultimately, governments wishto control moneysupplyandwhere cashismoving. This isespecially thecasewhere waytrustworthy ofsafeguarding people’s assets. Cryptocurrencies, suchasstablecoins, peggedto otherassetssuchastheUSdollar, asasafer cannow act andmore The greatest fear for any government isuncontrolled speculation affecting ahomecurrency. What governments? about and cheappayment mechanisms. banks losingcustomer loyalty, may withoutimmediate findtheirclientsforalternative looking action applications Ultimately transfers between wallets andmuchquickermore cost-effective for cross-border transactions, andwith Currently payments are expensive, takedays andmay require multiplehopsto achieve delivery. www.worldcommercereview.com common withalarge expat community, theCentral Bankhasapproved exchanges. several crypto exchanges.accounts found thePhilippines where In usingcryptocurrency remittance andtransfers companies are hasbanned banksandfinancialinstitutionsfrom providingNigeria andthreatens exchange services to closebank usingitasacheapersolutionto sendexpensiveprimarily FXacross borders. eitherusingorowning cryptocurrency, with33%ofNigerians in Nigeria, useisontherise cryptocurrency Nigeria, In associatednormally withspeculative assets. not isfargreater othercountries,In injurisdictions takeupofcrypto thanimmediately thought, particularly and destination offunds, spending patterns andfacilitate instant finedeductions. state theauthoritarian ofChina,digitizedIn programmable money, could easilyidentifyactivity, criminal source but possessionisnotyet affected. isstillpermitted, butanycrypto non-Yuen payments are bannedalongwithminingandtrading, cryptocurrency Importantly, Chinahas alsomandated those exchanges willneedto beregistered andregulated asownership of acceptedbills andisessentially thefirstdigital currency aslegal tender. China,thedigital In Yuen backedby depositsheldby China’s central bankhasbeentested inshopsandusedto pay without thespeculative risks. pegged to thefiat currency, blockchain usingunderlying technology, withimmediate value, trust, andportability, governments to introduce are looking theirown digital assets. These are totally undertheircontrol, backedand thanmerelyRather accept the thousandsofcoins, tokens, andassetsincirculation, many ofwhichhave novalue, www.worldcommercereview.com which would years agohave been classifiedon exchanges as ‘significant’ market events. Recent events have indicated justhow fragile, volatile anderratic canbe, themarkets with regular andfalls rises bodybelieves thatrisks theregulatory could negatively affect retail customers.Other regulation will come. derivatives bannedtheoffering theUKFCA products to ofcrypto In retail usersdue to anumberofinherent assets.transferring crypto legislate isillustrated by theterms ofaproposed bill, possession,issuance, which criminalises mining, trading and With theanticipated central introduction by theIndian bankofthedigital rupee, isprepared justhow farIndia to penalties are notyet clear. Arabia, Saudi toIn control foreign exchange, financialinstitutionshave beenfromwarned usingBitcoin although no legalredress. protecting investors especiallywhere wildfluctuations would affect investors whocan’t recover any lossesand have The viewwas takena)that itisinthe publicinterest to prevent to andb) fundillegalactivities, opportunities exchanges dueto lackofregulationtighter onthecryptocurrency restrictions andacentral for thecoins. authority bansincludethecentralExamples ofothercountry bankof Turkey, payments withfar banningcryptocurrency Morocco, Nepal, Pakistan, and Vietnam. hasledto outright bansonbuying,implications ofcrypto owning, andtrading altogether Bolivia, includingAlgeria, countriessanctions, canprohibit mining coins theycannotcontrol. And, insomecountries, fear of theeffectsand However, by imposingdraconian measures against thepopulation ofmajorfines, withtherisk imprisonmentand www.worldcommercereview.com remedy. compensation scheme equivalentto ofafinancialservices cover nolegal precedent losses, nohelpdesk, orlegal Just remember or exchange ifthefirm you’ve usedhasgoneoutofbusinessandcan’t pay your claim,there isno leaving owners theunfortunate withzero value. Permission was refused cases cite andthepotential lostorforgotten monieslost. Other passwords effectively He sought to permission search acouncil refuse facility, offering a25%donation ifhe was able to recover thedata. access andspendingof7,500Bitcoins, equating to more than$280million. You may have read aboutaUKinvestor whomistakenlythrew away ahard keyenabling drive containing thecrypto provides to theholder. isanadditional issueandpersonalresponsibility iskey. And security The onearea where willalways Bitcoin andothercryptocurrencies differentiate themselves intheanonymity it similar cost scheduleandclient experience that payments infrastructures should offer, thiswillbeapositive. bankscanembraceIf thetechnology andprovide standardisation, rationalisation andreusability withthesameor itisconvenient,itself; cheap, fastandextremely reliable. Whilst we have seenwildspeculation, the adversetechnology is soundandhasproved andprice fluctuation, risk Are currencies suchasBitcoin orbadthing? agood Bitcoin. review on exchanges, andplace firm restrictions miningandunregulated currencies activities, suchas useofcrypto As aresult we many expect more countries to lookat introduction ofown assets, taxabledigital and currency www.worldcommercereview.com inflation and unstable banking systems.inflation andunstablebanking financial inclusionwithlower and easier payment exchange, points ofentry especiallyin countries with rampant We ininternational to see increased tokens, trade, canexpect uptakeof crypto promoting withtheuseofbarter globally accessible, borderless mechanismfor DLT payment, by underpinned riskless technology. and independently ofcentral banks, regulators andgovernments, theyprovide ananonymous, secure, low cost, increasing role systems incomplementing globally. andcompeting withmonetary Designed to work autonomously Love currencies, themorloathe coins them,crypto andtokens, valued inbillionsofUSDollars, willplay an Conclusion monetizing theimmensepower requirements ofminingoperations globally. top 30energy usersworldwide. Perhaps taxonCO acarbon According to theBBC withlittleadditionaleconomicwarming onIran, benefit for thestate. jurisdictions. This large isearning sumsfor theminersbuthaving onpollutionandglobal asignificant impact costs areAnd countries (suchasIran) whichheavily hostingfacilitiesfor subsidize Chinaandother electricity with estimates ofrequired power equivalent to the total consumption of Denmark. allcompetingcryptocurrencies, inaglobal, decentralised computer network. This needsconsiderable resources, coins,method ofearning arrays minersrunpowerful ofcomputers that madewith verify blocksoftransactions hasbeenwritten abouttheamountMuch ofenergy required miningoperations. to runcrypto As theprimary The power game 3 Bitcoin usesmore energy thanArgentina, andifBitcoin was acountry, itwould beinthe 2 emission is the next step to emissionisthenext controlling orat least www.worldcommercereview.com 3. https://www.bbc.co.uk/news/technology-56012952 2. https://ripple.com/ripplenet/ 1. https://en.wikipedia.org/wiki/Ripple_(payment_protocol) Endnotes Graham Bright is theHeadofCompliance andOperations at Euro EximBank product, namelyblockchain.■ as awholewillbethrough technological the active advancement inglobaluseofwhat onemay classifyasaby- banks willembrace controlled regulated andeconomies digital onthefinance assets, industry thebiggestimpact However, whilstthenumberofcoin offerings, price, rise and value andfaithinthemwill wain,governments and commonplace. infavourAs cashceases transactions itsgrip onday-to-day ofplastic, we currencies becoming willseemore crypto www.worldcommercereview.com payments system. LaelBrainard provides anupdate on central bankmoneyas Technology dramatic is driving changeintheUS payments godigital Private money and CBDCs andadigital dollar www.worldcommercereview.com T good onredemption rights. Unlikecentral bankfiat currencies, stablecoins donothave legal tender status. reference assets, whethertheyallow unhosted wallets, andtheextent to whichacentral issuerisliablefor making widely intheassetstheyare linked to,Stablecoins vary ofusersto redeem theability thestablecoin claimsfor the currencies orgold. of digital assetwhosevalue istiedinsomeway to traditional stores ofvalue, suchasgovernment-issued, orfiat, First, sometechnology platforms are developing stablecoins for useinpayments networks CBDCs. of foreign CBDCsincross-border payments, andconcerns aboutfinancial exclusion—are the sharpening focus on Four developments—the growing role ofdigital private money, themigration to digital payments, plansfor theuse Sharpening thefocus onCBDCs focusrisks associated onthebenefits and withCBDCintheUS context paper thissummerto lay outtheFederal Board’s Reserve ondigital payments, current thinking withaparticular As ChairPowell discussedrecently, step early onpublicengagement isaplanto publishadiscussion animportant stepping up itsresearch andpublicengagement onCBDCs. thepotentialexploring for central bankdigital currencies (CBDCs) incross-border payments, theFederal is Reserve With technology platforms introducing digital private moneyinto theUSpayments system, andforeign authorities importance ofaccess toimportance safe, timely, payments andlow-cost for all. touches everyone dramaticechnology isdriving changeintheUSpayments system, whichisavitalinfrastructure that 1 . The pandemicaccelerated themigration andhighlighted to transactions the contactless 2 . 3 . A stablecoin is a type . Astablecoin isatype www.worldcommercereview.com burdens andraise costs for householdsandbusinesses. use ofprivate monies for consumer payments oftheUSpayment could fragment system parts inways that impose associatedGiven externalities withachievingscaleinpayments, thenetwork there that isarisk thewidespread money. asthebasisofanalternativestablecoins could serve payments system oriented around newprivate forms of arrangements, onunderlying Depending widelyadopted, somemay If expose consumers andbusinessesto risk. dollar public engagement on a digital version of the US US the of version digital a on engagement public Federal Reserve is stepping up its research and and research its up stepping is Reserve Federal in the broader migration to digital payments ... the the ... payments digital to migration broader the in In light of the growing role of digital private money money private digital of role growing the of light In www.worldcommercereview.com businesses to contactless transactions facilitatedbusinesses to transactions by contactless payments electronic demand for cash. times,While there the useofcashspikedat certain was apronounced by consumers shift and theUnited States,In thepandemicledto anacceleration ofthemigration to digital payments aswell asincreased form ofsafe central bankmoney. payments crowd outtheuseofcash,thisraises questionsabouthow to ensure that consumers retain access to a globe. alongwithitsprominent use in cross-borderone jurisdiction, payments, could have significant effects across the will decidewhetherto issueaCBDCbasedonitsuniquedomesticconditions,country theissuance ofaCBDCin Third, some foreign countries have chosen to develop and, insomecases, deploy theirown CBDC.Although each households’ andbusinesses’ needsandpreferences may to migrate digital payments further over time. extentto which to anticipate—the ofthiscommitment,payment, try we includingcash. As mustexplore—and part The Federal remains committed Reserve to that ensuring thepublichasaccess to safe, reliable, andsecure meansof banknotes intheUnited Statesbanknotes isnow notorious for inefficiency, fraud, inthe payments andinstability system whenthere inthenineteenthIndeed, theperiod was competition active century amongissuersofprivate paper potential volatility ofrun-likebehaviour. andtherisk A predominance ofprivate moniesmay introducerisks because oftheir consumer protection andfinancialstability like Sweden, were seeingapronounced migration from cashto digital payments Second, thepandemic accelerated themigration to digital payments. Even before thepandemic, somecountries, led to the needfor auniform form ofmoneybackedby thenational government. 6 . 5 . To theextentthat digital 4 . It . It www.worldcommercereview.com commercial aswithbankdeposits. bank, don’t generally consider whetherthemoneytheyare of thecentral aswithcash,orofa usingisaliability bank, to exchange central Consumers andcredit bankliabilities withoutconcern andbusinesses about liquidity risk. Central for payment bankmoneyisimportant systems becauseitrepresents asafe settlement asset, allowing users Preserve general access to safe central bank money objectives. discussseveral Iwillbriefly policy ofthemostprominent considerations. current andemerging payments options, what costs aCBDCmight andrisks entail, andhow itmight affect broader to any beclearaboutwhat benefitsaCBDC In assessment ofaCBDC,itisimportant would offer over andabove Policy considerations more quickly, cheaply, andseamlesslythrough digital means. The challenges ofgettingrelief payments to thesehouseholdshighlighted thebenefits ofdelivering payments bankaccount information Revenue withtheInternal Service. up-to-date weeks to distribute relief payments intheform ofprepaid debitcards andchecksto householdswhodidnothave While ofpandemicrelief thelarge payments majority depositsto moved viadirect bankaccounts, quickly ittook andthehighcostAmericans associated withbeingunbankedandunderbanked. Finally, ofaccess thepandemicunderscored to theimportance timely, safe, efficient, and affordable payments forall dollar, itisvitalfor theUnited States to beat thetableindevelopment ofcross-border standards. Given thepotential for CBDCsto gainprominence incross-border role payments ofthe currency andthereserve www.worldcommercereview.com such asacheque, to afew seconds in areal-time payments system. access thefundsfollowing significantly, apayment canvary up to a few days instruments, when relying on certain inpayments,other frictions, clearing, andsettlement. Today, thespeedby which consumers andbusinessescan benefitisthatOne expected aCBDC would reduce oreven eliminate operational andfinancialinefficiencies, or Improve efficiency risks. systems, aCBDCwould andtheassociated risk reduce consumer protection andfinancialstability counterparty public. introducing By safe central bankmoneythat isaccessible to households andbusinessesindigital payments contrast,In adigital dollarwould ofcentral beanewtype bankmoneyissuedindigital form for useby thegeneral lead to consumer protection threats or, at large scale,risks. broader financialstability New forms of private moneymay into risk introduce thepayments system counterparty innewways that could Insurance Corporation,Deposit andconsumers may beatthat risk theissuerwillnotbeableto honouritsliabilities. regulated to thesameextent asbanks, thevalue stored inthesesystems isnotinsured by directly theFederal Although various federal andstate laws establishprotections for users, nonbankissuersofprivate moneyare not protection asbankdepositsorfiat currency. obvious that newforms ofprivate moneythat reference fiat currency, thesamelevel of likestablecoins, cancarry whichprovide protection for supervision, deposit insurance consumers isnot andbusinessesalike. andbanking It This islargely becausethetwo are seamlesslyinterchangeable for owing mostpurposes to theprovision offederal www.worldcommercereview.com Most immediately,Most step we acritical to are buildastrong taking foundation with theintroduction oftheFedNow competition inretail payments intheUnited States. and infrastructures. The introduction ofaCBDCmay foundation provide for animportant beneficialinnovation and fundamentally changetheway are inwhichpayment andtheroles conducted activities offinancialintermediaries Advances intechnology, contracts, may have includingtheuseofdistributed ledgers andsmart thepotential to The intermediation chainsfor cross-border payments are notoriously long, complex, costly, andopaque. Cross-border payments, suchasremittances, represent oneofthemost compelling usecasesfor digital currencies. Reduce cross-border frictions competition could flourish. digital form ofsafe central bankmoney, aCBDCcould foundation provide onwhichprivate-sector animportant although itcould alsocontribute to fragmentation ofthecurrent payments system. providing By access to a available to businessesandconsumers, reduce costs, transactions andfoster innovation inend-userservices, Competition among adiversity ofpayment providers andpayment hasthepotential types to increase thechoices Today, retail payments thecosts are ofcertain transactions highandnotalways transparent to endusers Promote competition anddiversity andlower costs transactions conveniently, suchasonamobiledevice, andrecipients willhave fullaccess to fundsimmediately. Through consumers andbusinesseswillbeableto thebanksusing the service, sendandreceive payments day oftheyear. every aroundpayment theclock, services across community to America size provide andinevery willenablebanksofevery safe andefficient instantService anewinstant paymentsService, infrastructure that isscheduledto gointo intwo years. production The FedNow 7 . SM

www.worldcommercereview.com how CBDC could affect financial stability and monetary policy transmission. policy how andmonetary CBDCcould affectfinancialstability The introduction ofaCBDChasthepotential to have effects, andthere wide-reaching are openquestionsabout transmission policy Preserve andmonetary financial stability and notreplace andbankaccounts. currency which form ofthecurrent the underpinnings retail payments system. The design ofany CBDCshouldcomplement Consumers have access to reliable moneyintheforms of private bankaccounts andcentral bankissuedcurrency, forA guidingprinciple any payments innovation isthat itshouldimprove uponthe existing payments system. Complement andbankdeposits currency standards that may applyto CBDCs, given thedollar’s role currency. asareserve important cross-border to beengagedat theoutsetondevelopment payments. willbeimportant ofany It international We are engaging inseveral internationalto improve efforts thetransparency, timeliness, and of cost-effectiveness abroad. Payments Infrastructures, andtheG7to ensure andMarket theUSstays abreast ofdevelopments related to CBDC We are collaborating withinternational colleagues through theBankfor InternationalSettlements, Committee on order to achieve material improvements incost, timeliness, andtransparency solution, international collaboration willberequired onstandard settingandprotections in againstillicit activity cost, opacity, andtimerequired for cross-border payments. ofthe While theintroduction ofCBDCsmay bepart Digitalisation, inthenumberofintermediaries, alongwith areduction holdsconsiderable promise to reduce the 8 . www.worldcommercereview.com system deposits competition could result inmore attractive accounts terms ontransactions andanoverall increase inbanking banks infavour ofCBDCholdings at moments offinancial stress researchSome indicates that theintroduction ofaCBDCmight raise of aflight therisk outofdeposits at weak protected. responsibilities for preventing establishinghow andclearly consumer illicittransactions financialdata would be Addressing willrequire objectives thesecritical across government working agenciesto assign roles and preventing andverifying digital identities. illicitactivity There are ofapproaches avariety to safeguarding ofpayments whilealso identifying and transactions theprivacy verification ofidentities. prevent to maintain theintegrity andtrace ofthefinancialsystem, illicitactivity whichwill require thedigital The design ofany CBDCwould needto bothsafeguard ofhouseholds’ theprivacy payments and transactions Protect andsafeguard privacy financialintegrity system, itmay increase resilience relative to apayments system where private moneyisprominent. While to it iscritical consider the ways inwhichaCBDCcould introduce relative risks to thecurrent payments transmission more broadly. policy monetary preserve the design ofany CBDCwould needto includesafeguards to protect againstdisintermediation ofbanksandto transmission, aswellBanks play role asinpayments. acritical policy incredit intermediation andmonetary Thus, 10 . 9 . Other research. Other indicates that theincrease in www.worldcommercereview.com CBDC may be one part ofabroader solutiontoCBDC may thechallengeofachievingubiquitous account beonepart access FedNow isto provide ubiquitous access to aninstant payments institutions. system viadepository accounts and other banking services targeted to andunbanked communities services accounts underbanked andotherbanking for strengthening theCommunity Reinvestment emphasize Act thevalue ofbanksproviding cost-free, low-balance forhighlighted allhouseholdsto that have itisimportant accounts. transactions The Federal Reserve’s proposals At theheight ofthepandemic, thechallengesassociated withgettingrelief payments to hard-to-reach households burdens onthese households, whosefinancial resilience fragile. isoften payments to ensureInclusion that cash-basedandvulnerable populations cansafely access andbenefitfrom digital Bank ofAtlanta collaboration islaunching apublic–privateReserve sector as aSpecialCommittee on Payments To explore research thesebroader issues, onfinancial inclusion. theFederal isundertaking Reserve The Federal offer, 18.7percent andafurther were asof2017 underbanked Today 5.4percent householdslackaccess ofAmerican to bankaccounts andtheassociated payment optionsthey Increase financialinclusion segment ofthepopulation records account,transaction along withtheneedto accounts onactive maintain up-to-date to reach alarge A broader solutionto financialinclusion would alsoneed to address any perceived to maintaining barriers a most inneed. emergencies, CBDCmay offer transfer amechanism anddirect for theswift offunds, providing rapid relief to those on thedesign, CBDCmay have to lower theability costs andincrease transaction access to digital payments. In 15 . 14 . 11 . The lackofaccess to bankaccounts imposeshigh 12 . And acore goalof 13 . Depending . Depending www.worldcommercereview.com source license for thecode. to meetgoalsonthroughput ofgeographically withcore dispersedtransactions processing andcreate anopen- decisions. MITandtheBoston Fedof policy that willdocument planto theability release quarter awhite papernext This work aimsto research thefeasibility ofthecore processing ofaCBDC,whileremaining agnostic aboutarange hypothetical platform digital currency usingleadingedgetechnology design options of Institute with Massachusetts Technology’s Digital Currency Initiative onProject Hamilton to buildandtest a (MIT) To deepenourresearch onthetechnological design ofaCBDC, theFederal BankofBoston ispartnering Reserve the potentialrisks associated benefitsand withCBDC. Policy program, issues associated isconsidering abroad ofdigital withtherise payments, range ofpolicy including on potential future states ofmoney, payments, anddigital currencies. Asecond group, theDigital Innovations For example, the TechLab group research at theFederal hands-on andexperimentation Board isperforming Reserve potential USCBDC. with digital innovations inpayments, clearing, andsettlement,risks associated includingthebenefitsand witha teams at theFederal areMultidisciplinary investigating Reserve issuesassociated thetechnological andpolicy Technology considerations expanding access to individualswhodonotcurrently usetraditional financialservices. to increase financialinclusion. The initiative willidentify CBDCdesign approachesfeatures anddelivery focused on This work iscomplemented by anewFederal BankofCleveland initiative Reserve to explore for theprospects CBDC 16 . www.worldcommercereview.com executive issue. agencies are thisimportant exploring similarly stepping upitsresearch andpublicengagement onadigital version oftheUSdollar. ofCongress Members and use offoreign CBDCs incross-border payments, offinancial inclusion,the is andtheimportance FederalReserve light ofthegrowingIn role ofdigital private moneyin thebroader migration to digital payments, thepotential Public engagement monitoring, andmanaging associated risks withdigital assets. regulators work together to develop common approaches to ensure that banksare appropriately identifying, canhaveGiven agency implications for that that decisionsat onebanking theotheragencies, itisimportant regulators, to identify any andworking regulatory, andoversight supervisory, framework gaps. The Federal monitoring developments isactively andother inthisarea, Reserve engaging withtheindustry cybersecurity, price volatility, privacy, andconsumer compliance. lower costs, digital assetsposeheightened suchasthoserelated risks Act/anti-money laundering, to BankSecrecy While distributed ledgertechnology may have thepotential to improve efficiencies, increase competition,and assets. enhance their own operations andinresponse to demandsfrom suchascustody theirclients forofdigital services institutionsto exploreResearch banking newtechnology andexperimentation to are at alsooccurring supervised activities Banking money-laundering features, core willimpact processing anddesign. performance Subsequent work will explore how addressing additionalrequirements, includingresiliency, privacy, andanti- www.worldcommercereview.com works for allAmericans. ■ The Federal remains committed Reserve to asafe, ensuring inclusive, efficient, andinnovative payments system that January 2021). January Szemere, “Payments5. Codruta andRóbert Boar go(even more) digital” (Basel:BankforInternational Settlements, (Philadelphia: ofPennsylvania University Press, 2020). 4. See, forinstance, Joshua R Greenberg, BankNotes andShinplasters: The Rage forPaper MoneyintheEarly Republic Symposium ontheFuture ofPayments, Stanford University, California, February 5,2021. Lael Brainard, IssuesforConsideration,” ofPayments3. See Digitalization Some andCurrency: “The remarks atthe news release, May20,2021. Advances Rapid ChangeintheGlobalPayments Driving Landscape,” Board ofGovernors oftheFederal System Reserve Jerome Powell,2. See “Federal ChairJerome HPowell Reserve theFederal Outlines Reserve’s to Response Technological Board ortheFederal Market Open Committee. their assistance inpreparing These are thistext. my own viewsanddonotnecessarily reflectthoseofthe Federal Reserve 1. Iamgrateful to Alexandra Fernandez, Pope Danburg, Mills, andDavid oftheFederal Sonja David Board for Reserve Endnotes Lael Brainard isamemberoftheBoard ofGovernors oftheFederal System Reserve with regard to aCBDCintheUScontext comment ona range ofquestionsrelated to payments, financialinclusion,data privacy, and information security, As noted above, to helpinform theseefforts, the plans to issueadiscussionpaper to solicitpublic FederalReserve 17 . www.worldcommercereview.com 12, 2021. 15. Federal BankofAtlanta, “NewCommittee Reserve to Advance Inclusive Efficient, Safe, Payments,”` newsrelease, May 14. For more information,see theFederal Community Reinvestment Reserve Act Proposed Rulemaking Review, Vol. 89,p. 28,2021. 113,January Crawford,and John Lev Menand, andMorgan Ricks, “FedAccounts: Dollars,” Digital (PDF)George Washington Law Payments System Research Briefing,December FRBKansas, 2,2020); (KansasCity: Federal BankofKansasCity Reserve Leigh Jesse 13. See Maniff, Crafting Inclusionby aCentral Design: Currency to ReachAllAmericans BankDigital 12. See, forinstance NationalAccount theBankOn Standards and Underbanked FDIC,2017). Households(Washington: 19,2020);andFederal FDIC,October (Washington: Insurance Deposit Corporation, ofUnbanked FDICNationalSurvey 11. Federal Insurance Deposit Corporation, How America andFinancial Banks:Household UseofBanking Services Working Paper No. 605(London: BOE, July18,2016). Barrdear Kumhof,10. John andMichael The Macroeconomics ofCentral Currencies BankIssuedDigital Paper 642(Paris: BanquedeFrance, 2017). 9. ChristianPfister, Policy Currencies: andDigital MuchAdo Monetary (PDF)BanquedeFrance Nothing? about Working Board,Stability Enhancing Cross-border Payments: 13,2020). FSB, Stage3Roadmap(PDF)(Washington: October to theG20(PDF)(Basel:BIS,July2020);andFinancial ofaglobalroadmappayments: buildingblocks Stage2report BankforInternational Settlements, Committee8. See onPayments andMarket Infrastructures, Enhancingcross-border Working PapersDepartment No. 20-13(Boston: FRBBoston, 2020). and Merchant Cost Pass-through intheUnited States andCanada (PDF),Federal BankofBoston Research Reserve Felt,7. Marie-Hélène Fumiko Hayashi, Stavins, Joanna andAngelika Welte, of Effects Distributional Payment Card Pricing Francisco,San February 2021). Supplement to the2020Findings ofConsumer Payment from theDiary Choice Francisco: (San Federal Bankof Reserve 6. Kelsey Coyle, Laura Consumer andShaunO’Brien, Payments Kim, andtheCOVID-19 Pandemic: The Second . . , BankofEngland , (PDF) www.worldcommercereview.com delivered isbasedonaspeech attheConsensus by 2021Conference,This CoinDesk article Washington, DC(viawebcast) news release, May20,2021. Advances Rapid ChangeintheGlobalPayments Driving Landscape,” Board ofGovernors oftheFederal System Reserve Jerome Powell,17. See “Federal ChairJerome HPowell Reserve theFederal Outlines Reserve’s to Response Technological Hours,Office August 13,2020. and Lael Brainard, “An Currencies,” Update onDigital remarks at theFederal Francisco BankofSan Reserve Innovation Research ProjectDollar Honors2Hamiltons, Alexander andMargaret,” Federal BankofBoston, February Reserve 25,2021; the Program onInternational Financial Systems, Harvard Law School, May12,2021,;JimSCunha, “Boston Fed’s Digital EricRosengren, “Central16. See BankPerspectives onCentral Currencies,” BankDigital remarks at thepaneldiscussionof www.worldcommercereview.com looks at how theycould be regulated iftheyare used Christina Segal-Knowles talksaboutstablecoins. Segal-Knowles Christina She Stablecoins: what's old isnewagain as aform ofpayment www.worldcommercereview.com I what isrequired to ensure private money This means that asfinancial regulators, stablecoins are notlaunchingusoff into some brave new world. know We technology theyare asoldmoneyitself. usingisnew-thebasicelements ofastablecoin old.fact, are In very IamnotgoingtoSo focus onwhat’s newaboutstablecoins. Instead, Iamgoingto focus onwhy –even ifthe canonly be realised ifnewforms ofdigitalBut theseopportunities moneyare safe. new ways to pay. And there could bepotential gainsfrom longterm financialstability new ofdigitalforms money. offer new convenience andfunctionality. They could increase the resilience ofpayments – by offering alternative Stablecoins andothernewforms ofinnovation inpayments potentially offer benefits. They could reduce costand payments. IwilltouchAnd to onlyonthosestablecoins beclearfrom that aimto thestart, beusedwidelyasmeansof don’t thinkaboutit. Luckily, regulation meanswe don’t have to. innovative and flashy. Even day thoughmostmoney isalreadywe useevery private money, ofus the vast majority Before to Iturn stablecoins Iwant to spend aminute onone ofthereasons why theideaofprivate moneyfeels Private money: thebasics inshiny technologysomething ispackaged we don’t somehow treat itposesdifferently. therisks existing national currencies. tokens issued by theprivate whichaimto maintain sector a stablevalue at alltimes, inrelation primarily to ’m goingto focus bigthingindigital onwhat payments issometimesbilledasthenext -stablecoins -digital 1 is safe for wide-scale use. issafe for wide-scale The keyhere isto ensure that justbecause www.worldcommercereview.com IOU from thebank. are justarecord ofhow muchaprivate company –here, thecommercial bank-owes itscustomers. Think ofitasan paying withisn’t sterling issuedby theBank ofEnglandwithapromise to pay thebearer –it’s abankdeposit. Those But inreality, whenyou tapyour debitcard inashoporpay your backviaabanktransfer, friend themoneyyou are Wonderful Lifewhichfeature peopledemandingthat banksgive thembacktheirmoney. moved iscentral bank-issued money. For example, remember thoseiconic Poppins scenes from andIt’s Mary a are simplystoring oursterling issued by thecentral bankfor us, andthat whenwe pay electronically, what isbeing Popular culture simplifiesourideasaround often what ourmoneytakesandcan form reinforce theideathat banks that are age-old are that recognising and properly regulating the elements elements the regulating properly and recognising forms of digital money are safe – which means means which – safe are money digital of forms ... these opportunities can only be realised if new new if realised be only can opportunities these ... www.worldcommercereview.com And aswe thinkaboutnewforms ofdigital payments, that we donottakethisfor itisimportant granted. model isrelatively recent. was not ever thus. It ensure balances that upto transactional £85,000remain interchangeable withcasheven ifthat happens. This While banks dofail, regulation backstops makesthat andliquidity relatively rare. And deposit protection schemes deposits from anotherbank. thatuniformity –ensuring bankdepositsfrom onebankcanbeusedinterchangeably withcashandbank a result, promotes financialstability. that bankdepositscanbe exchangedThe fact for cash ondemandguarantees that commonlyThe usedprivate fact moneyisinterchangeable withcashanchorsitto national currencies and, as wallet paymentscard astheyare orsmartphone cash. bank holdsyour depositbefore you pay –andtheyare generally aswillingto receive private moneyintheform of We canassumethat thevalue ofthemoneywe usewillbemore orlessstable. Shopsdon’t needto scrutinize which Today we intheUnited Kingdom don’t generally pay attention to whetherwe are usingprivate orpublicmoney. Private money: why dowe care? term declinethat islikelyto continue deposits rather thancash funds householdsandbusinessesholdthat are usedto makepayments typically are now heldascommercial bank evenSo thoughwe don’t thinkaboutit, we’re already usingprivate moneyallthetime. percent Ninety-five ofthe ie.from commercial ourbank, bankmoney, issuedby into theBankofEngland. banknotes When we say that we from are anATM “withdrawing ourmoney” -what we doingisconverting are ourIOUs actually 2 . decreaseThe pandemichasprompted incashusage, accelerating afurther alonger- 3 . www.worldcommercereview.com they believed –itmight betoo late thequeuesoutsideofbranchesRemember in2007,asdepositors rushedto exchange theirdepositsbefore – other bankdeposits. from retail depositors –whosuddenlyworried that theirdepositswould nolongerbeinterchangeable withcashor Rock’swhere worries abouttheNorthern fundingledto ofconfidence; acrisis first from wholesalelendersandthen Think ofthe Great inIt’s bankrundepicted Depression-era aWonderful . Life example – Rock Think of the Northern their IOUs withdepositors andlendersmaintain theinterchangeability andreliability ofthemoneytheyissued. alossofconfidence have ofprivate crises intheability issuers – commercial hadatOther theirheart banks – to fulfil forms of crypto-assets, likeBitcoin, areforms too ofcrypto-assets, volatile to beattractive asawidespread meansofpayment. a stablevalue vis-a-vis existing forms ofmoney But letusgobackto stablecoins andinnovation inpayments. Stablecoins are digital tokens that aimto maintain Innovation components offinancialstability. ability to againstthedollar maintainability thevalue oftheirlocalcurrency theemerging 2000s, ofthe1990sandearly In financialcrises peopleandbusinesseslostfaith inthestate’s market that isusuallyconsideredMoney safe. much. that donotthinkaboutvery peoplenormally Money of themoneypeoplerely on for transactions. haveA large ofthelast numberoffinancialcrises century featured alossof confidence inthe andsafety reliability 5 . Confidence ofprivate inthecredibility andstability moneyare fundamental 6 . Their origin stories generally world. trace backto Most thecrypto 4 . www.worldcommercereview.com bad timesaswell asgood. to makeapayment –liketheability businesses canrelyto getaloan-in ortheability onessential financialservices frombanks orotherexisting seeks firms Instead toensure financialstability competition. that people and This shouldn’t thestatus quo. beconfused withpreserving Financial isn’t stability aboutprotecting incumbent England’s andfinancialstability. to maintain ability monetary all ofthis–isto ensure that financialinnovations, includingnew ofdigitalforms money, donotimpairtheBank of I don’t have abethere -Iamacentral bankernotaventure job, capitalist. My asacentral bankerandregulator -in forms ofprivate bigthing. non-bankmoneymight bethe next Ortheymight beaflashinthepan. form ofsterling-based retail payments. To beclear-Idon’t ifthiswillhappen.Stablecoins andothernew know ispossibleinthiscontext that stablecoinsIt could scaleupandgrow rapidly, andbecome widelyusedasatrusted and interchangeability with moneyissuedby central banks. which canbetransferred asameansto pay for things. are Both promising (orat to)against leastaspiring stability stablecoinsBoth andbanksare offering a representation ofwhat aprivate company owes itscustomers –anIOU- a substitute for acommercial bankdeposit. with apromise to ensure that thevalue remains 1for 1at alltimes. Stablecoins therefore could as potentially serve To theirvalue solve solutionofanchoring to national this, currencies, stablecoins have often to turned theage-old as payment. There isnoreason to thinkthistimeisdifferent We have seentimeandagainthat ifmoneyisnotreliably stablemostpeoplewillnotwant to useoraccept it 7 . www.worldcommercereview.com the right regulation, astablecoin could potentially use. bemadesafe for wide-scale covered earlier, ofmoneyheldfor isalready intheUnited thevast Kingdom private. majority transactions So, with But itisequallytruethat private moneycanbemadeacceptable asawidespread meansofpayment –indeed, asI Loss ofconfidence inprivate moneycanbeamajorthreat to financialstability. As we discussed, ofalossconfidence therisk ofprivate inthecredibility andstability moneyisnottheoretical. system. to confidencefor undermine inmoneyandpayments, stablecoins inparticular andhence inthewiderfinancial phase, themostsignificant fromAsrisk arises may atransitionary such,whileotherrisks during thepotential arise get aloanare relatively around modest–althoughthere thisresult. isconsiderable uncertainty findingsshow that theimplications fact ofthisinthelong term ofhouseholds andbusinesses In to for theability an orderly manner. headlines, even doesnotinherently suchadramatic shift risk aslongithappensin constitute afinancialstability deposits from banksand into astablecoin orCentral to BankDigital Contrary somepress Currency (CBDC). The discussionpapermodelswhat would happenifalarge numberofhouseholdsandbusinessesmoved their of theemergence ofstablecoins andothernewforms ofdigital money. mandate. stability In it for we present itsfinancialandmonetary anillustrative scenario to examine theimplications theBankofEnglandpublishedaDiscussionPaper thisweek, Earlier that examines theimplications ofstablecoins A regulatory framework www.worldcommercereview.com These are: private confidence moneywhichunderpins that itisinterchangeable withcash it standsto reason that stablecoins willneedto meetthecore elements framework ofourexisting regulatory for stablecoins seektoIf beacceptable widespread substitutes for commercial bankdepositsasameansofpayment, to beaclosesubstitute –commercial bankmoney. issued by a central bankwherever possible. Where that’s notpossiblethey are permitted to settle inmoneydeemed ofourfinancialtransactions, whether underpinnings we’re aderivative buyingmilkorclearing –are publicmoney Financial are infrastructure firms market also regulated to ensure that theassetstheyuse for settlement –the introduced following financialcrises. These core rulesandrequirements were developed over time–inmany anderror, casesviatrial withnewrules privately-issued moneywith confidence andinterchangeably withcash. day.money itusesevery to Banksare extensive rulesandrequirements subject to ensure that consumers canuse framework existingOur regulatory seeksto ensure that ofthe the publicisableto trustthereliability andstability • • Capital requirements – to lower ofinsolvency, therisk theseare calculated basedonthenature oftherisks back hismoney. otherwordsto In thedepositor; – thelittleboy’s Poppins to right inMary demandthat thebank ‘give him A legalclaim–to allow for prompt redemption at alltimes, for theamount initiallydeposited, andat nocost 8 . www.worldcommercereview.com bank money. the same–that systemic stablecoins usedasmoneywilloffer thesameprotection to coin holdersas commercial Ultimately, thespecific requirements may well bedifferent from thoseapplicable tobanks, buttheoutcome willbe theyonlybackthemselvesIf incentral bankreserves, whichare inherently liquid, theydon’t facilities. needliquidity liquidassetstheywon’tquality needregulation to cover credit risk. applications oftheabove features. For example, ifstablecoin operators themselves are inhigh to restricted backing This isnot to say modelfor theregulatory stablecoins needsto beidentical to could banks. includedifferent It • • the United Kingdom. money. episodewas Rock to increase Notably–oneofthekeyresponses FSCS coverage to theNorthern in amounteven fails, depositsup ifafirm remain exchangeableto a transactional certain for central bank Compensation (FSCS)(orinothercountries Scheme depositinsurance), incaseoffailure. This ensures that, A backstop to compensate depositors –orinthiscasecoinholders –suchastheFinancial Services failure;in firm and the valueofstablecoins from don’t issuesarising difficulties sellingassetsbacking liquidity temporary result for central bankfacilitieswhere relevant, to meetfirms’ needsin extremis. liquidity This ensures that requirementsLiquidity –to ensure redemptions by canbemetinmostcircumstances eligibility –supported chances that fails. afirm (credit, asacushion to operational, losses, absorb issuers undertake theyact reducing risks); market the www.worldcommercereview.com And theycould even have long-term benefits for financialstability. cheaper andmore efficient payments with greater functionality. They couldincrease the resilience of payments. As Isaidat theoutset, ifnewforms ofdigital moneycanbemadesafe, they could potentially contribute to faster, lay afoundation for sustainableinnovation. opposite. Establishingasecure environment regulatory for newforms of digital money to operate withintheUKwill I recognise that thethemeshere soundcurmudgeonly. Butthisisnotananti-innovation message: quite the different results. regimeregulatory for stablecoins process at buildsonthislearning square oneandexpecting -rather thanstarting coreOur rulesandrequirements camethrough anderror, trial following often financialcrises.Our ona work systemic scalethenitshouldberegulated assuch. matter oftechnology what you’re type is If afirm private usingorthelegalformoffering ofthefirm. moneyona This means that we willholdthemto standards similarto thoseapplicableto existing private money. doesn’t It new form ofprivate money. they poseare notnew. We ascentral bankersandregulators needto lookat themas what theypropose to be–a As Imentioned earlier, stablecoins may beinnovative inthetechnology theyuse, butthefundamental questions over different againbutexpecting results. (widely–andinaccuratelydefinition ofinsanity Einstein) isdoingthesamething – attributedover to and Albert that isoldnewagain.ButIamgoingto endonadifferent isacliché:everything The cliché:the titleofthisarticle Conclusion www.worldcommercereview.com : “[Crypto-assets] should be considered as assets rather than currencies. However, as as However, currencies. than rather assets as considered be should “[Crypto-assets] : noted FPC the 2018, March In 7. decision yet. decision of digital money issued by the central bank. The Bank of England is exploring the case for a CBDC but has not made a a made not has but CBDC a for case the exploring is England of Bank The bank. central the by issued money digital of 6. Stablecoins are different from CBDC. While stablecoins are a privately issued form of digital money, CBDCs are a form form a are CBDCs money, digital of form issued privately a are stablecoins While CBDC. from different are Stablecoins 6. (Bank of England, 2018) England, of (Bank on” years 10 – crisis financial “The See: 5. ). restrictions” cash lifts “Argentina 02/12/2002: (BBC, Argentina. in Corralito the of example the See 4. availability, and ensure cash remains available despite the impacts of Covid. of impacts the despite available remains cash ensure and availability, and the PSR have been working together on the Joint Authorities Cash Strategy group to monitor the use of cash, ATM ATM cash, of use the monitor to group Strategy Cash Authorities Joint the on together working been have PSR the and practice, the UK authorities remain committed to ensuring access to cash to those that need it. The Bank, HMT, FCA FCA HMT, Bank, The it. need that those to cash to access ensuring to committed remain authorities UK the practice, DP, June 2021. Moreover, in in Moreover, 2021. June DP, money’ Digital of forms ‘New in A chart See ; trends’ and ‘Statistics See ; week’ each ATMs 3. See LINK News and media contact, ‘ contact, media and News LINK See 3. millennium of macroeconomic data’ macroeconomic of millennium 2. This is based on the amount of cash held by the public as a share of total cash and sight deposits. See Part V of ‘ of V Part See deposits. sight and cash total of share a as public the by held cash of amount the on based is This 2. general public is cash, in the form of coins and notes. and coins of form the in cash, is public general 1. Private money mainly takes the form of deposits held in bank accounts. The only form of public money accessible to the the to accessible money public of form only The accounts. bank in held deposits of form the takes mainly money Private 1. Endnotes England Christina is Executive Segal-Knowles for Director Financial Markets at Infrastructure of the Bank properly ■ regulating theelements that are age-old. canonlyberealised ifnewforms ofdigitalBut theseopportunities moneyare safe –whichmeansrecognising and , Research dataset, Bank of England. of Bank dataset, Research , Coronavirus Crisis means cash use down but UK still withdrawing £1 billion from from billion £1 withdrawing still UK but down use cash means Crisis Coronavirus A A www.worldcommercereview.com Policy Conference Policy given at the Westminster eForum eForum Westminster the at given speech a on based is article This comments. helpful their for Cleland Victoria and Hauser help in preparing these remarks. I am also grateful to Antoine Lallour, Nicholas Butt, David Copple, Shiv Chowla, Andrew Andrew Chowla, Shiv Copple, David Butt, Nicholas Lallour, Antoine to grateful also am I remarks. these preparing in help I am grateful to Morgane Fouche, Matthew Osborne, Stephanie Haffner, Robert Page and James Pople-Hoskins for their their for Pople-Hoskins James and Page Robert Haffner, Stephanie Osborne, Matthew Fouche, Morgane to grateful am I of value, robustness of legal claim and the ability to redeem at par in fiat.” in par at redeem to ability the and claim legal of robustness value, of instruments they should meet standards equivalent to those expected of commercial bank money in relation to stability stability to relation in money bank commercial of expected those to equivalent standards meet should they instruments s as money-like money-like as s chain payment systemic in used are stablecoins “Where that: noted FPC the 2019, December In 8. currently limited potential to be adopted as money in the future, and hence could prove worthless.” prove could hence and future, the in money as adopted be to potential limited currently assets, they establish no claim on any future income streams or collateral. They have no intrinsic value beyond their their beyond value intrinsic no have They collateral. or streams income future any on claim no establish they assets, www.worldcommercereview.com The Bank of England has issued banknotes forThe BankofEnglandhasissued banknotes over 300 years. JonCunliffe talksaboutfuture ofmoneyinthe ‘public money’? UK inanincreasingly digital world Do weDo need www.worldcommercereview.com I by thestate, butdigital However, ofthemoneyheldandusedby peopleinthe UK today themajority isnotphysical ‘public money’, issued indeed, isprobably theimagethat have many peopleinthiscountry money. intheirmindwhentheypicture Public moneyfor general useintheUKisonlyavailable intheform ofphysical ishighlyvisible, trusted cash.It and, target. behalf ofthestate, that by ischarged keepinginflation thestablevalue withensuring ofthecurrency at its2% These notes andcoins are denominated inPounds istheBankofEngland, on It Sterling, oftheUK. thecurrency used millions of times every day byused millionsoftimesevery thepublicto maketransactions pledgeare inmillionsofwallets andpurses carried thefamous “Ipromise to paythebearer” banknotes, carrying In the UK, theBankofEngland–apublicinstitution theUK, In pre pandemicwere madeusingpublicmoneyintheform ofcash,down from closeto 60%adecadeearlier be usedto makepayments are now everyday heldasbankdepositsrather use, thancash.In only23% ofpayments private money. Iamnotaware ofany orresearch surveys that address thisquestion. between publicandprivate money–orevenunderstand thisdistinction that for mostofthetime theyare using that familiarBankofEnglandpromise to ‘pay thebearer’. is notclearto meto what It extentthegeneral public This private moneyisnotaclaimonthestate orbackedwiththeresources ofthestate. isnotcovered It by citizens for everyday use. This may seemarather oddquestion. by spending butrather abouttheform ofmoney itself: ‘public money’ Imean moneyissuedby thestate to its want to talkaboutwhether we need ‘public money’. here aboutpublic Ishouldmakeclearthat Iamnottalking 3 ‘private money’ issuedby commercial banks. Around 95%ofthefundspeopleholdthat can 1 – hasbeenissuingmoneyto thepublicfor over 300years. Its 2 . 4 . www.worldcommercereview.com particularly interests them. particularly And, ofmoneytheyuse, ofcrisis, outsideperiods thetype what andwhostandsbehindit, isnotsomethingthat that peopleare generally unaware between private andpublicmoney. ofthedistinction reprehensible shouldn’t ofcourse andonecertainly onit. Butfor theanswers whatsuggest basepolicy itisworth, I have, over theyears sometimes askedthequestionofthoseIhave met. Suchanapproach isstatistically role that public money plays in the economy today economy the in plays money public that role will greatly reduce and perhaps eventually eliminate the the eliminate eventually perhaps and reduce greatly will accelerating changes in the way we live and transact that that transact and live we way the in changes accelerating of money that are on the near horizon we are seeing seeing are we horizon near the on are that money of ... even without the new, technology enabled forms forms enabled technology new, the without even ... www.worldcommercereview.com period inwhichthevalueperiod ofallmonies, publicandprivate, denominated insterling was unstable – publicorprivate –hasbeenshaken. framework stability islessthan25 years oldand followedThe monetary a We donothave to lookthat farinto thepastto seeepisodeswhenthisconfidence inthemoneyusedUK ATM orpay cashinabankaccount, orlossofvalue. withoutrestriction claims onbanks, into publicmoney, claims onthestate, timetheygothe whenever theywish-asdoevery And, crucially, that peoplehave thistethering isalso dueto thefact to theright exchange theirprivate money, bank fail. And a depositguarantee schemegives holdersofcommercial bankmoneytheprotection ofabackstop should the England publicmoneyandare ableto includingintimesofstress. borrow from shortfalls theBankto meetliquidity They hold accounts at between theBankofEngland, themselves electronically settletransactions inBankof ofaccount.value ofthecurrency/unit Commercial banksthat issuemoneyare regulated to ensure theyare robust. elements.This framework An independent hasanumberofimportant central bankensures ofthe thestability tethers private moneyto thepublicmoneyissued by thestate. isdueto isnotanaccident. thecredibility oftheinstitutionalframework It governingIt moneyintheUKthat in theUKhave ageneral confidence inthemoneytheyuse regardless ofits agoodthing. andissueris,form Ithink, that,The of history, unlike in some periods fact we do not at present think much about these things and that people experience. only10 thefinancialcrisis years ago, In thegovernment was forced system at to bailoutthebanking The current framework regulatory for banksanddepositguarantee schemeoriginate inan even more recent 5 . www.worldcommercereview.com money. As aresult theuseofpublicmoneyinform ofphysical cashhasbeendeclining. On thedemandside, convenience, especiallywithregard hasfuelledthepublicappetite to for e-commerce, digital more widelyused, especiallyfor lower value transactions. On thesupplyside, commercial digital moneyhasbecome more bank, available to thegeneral public, cheaperand We have beenlivingthrough ofsuchchangefor aperiod thelastfew decades. or more convenient to use. of technological innovation that hasimproved ofmoney–for example, itmore thefunctionality bysecure making put have andbetween societies. variedmaterially beendriven through Change hasoften by history theinteraction isnotonlyasocialconvention,Money dynamicone. itisavery The forms itcantakeandtheusesto whichitcanbe Future trends books. isintheendasocial convention Money just somethinginthehistory fragile that understress. canbevery But thesenotsodistant that episodesunderline threats to ofmoney, confidenceforms inmoneyorparticular isnot system to anextreme economic shock. sector.commercial banking The experience ofthelast12months hasdemonstrated theresilience ofthebanking To beclear, Ithinkthereforms we have madeover thelast10years have ledto amuchmore robust andresilient banks –andthegeneral lossofconfidence inprivate moneythat would have ensued. costenormous to avoid themillionsofcitizens losingthemoneytheyheldinform ofclaimsoncommercial www.worldcommercereview.com of e-money, aderivative ofcommercial bankmoney payment were to usinglesscashthanprior thepandemic. There hasfor obvious reasons beengreater useofcontactless temporarily, accelerated thesetrends. Arecent BankofEnglandsurvey, for example, found that 70%ofrespondents The pandemic andconsequent hugeforced experiment inremote has, living, andtransacting at least working digital payment over recent from decadeshasmeant publicto ashift private money. As theonly digital moneyavailable to thepublicisprivate, commercial bankmoney, from physical theshift cashto ofallpayments,make upthree quarters withdebitcards aloneaccounting for 42%ofpayments. ledger, transform themoneywe whichmay further use. There are, however, onthenear horizon newer technologies andinnovations, suchastokenisation anddistributed ‘old hat’ now quite are familiar certainly convenient for bothecommerce andface to have face transactions beentheresult oftechnologies that ifnotquite recentOver years, thetechnological innovations that have madedigital private moneycheaperandmore the move from physical from to electronic/digital publicto moneyandwithitashift private money. however, that itisarelatively safe acceleration betthat theexperience ofthelast12months willleadto of further We donot, ofcourse, how persistent know thesechangeswillbewhenwe emerge from thepandemic. Ithink, and debitpayment cards to thegeneral public These intheUKwhere changeshave marked theyhave beenvery mainlytaken theform oftheissuance ofcredit 8 andinternet transactions 9 . 10 . 6 , thedevelopment of aFaster Payments System andtheemergence 7 . Digital forms ofpayment cash in2015andnow overtook www.worldcommercereview.com entirely disappearany timesoon.Many stillrely onitfor anumberofreasons continued access to withotherauthorities to support cash.Idonotthinkthat demandforand isworking cash will The Bankof Englandiscommitted physical to making cash,banknotes, available aslong asthere is demand for it ‘Blackberry’ world aboutto seetheintroduction ofthe ‘iPhone’. waveagainst thenext majortransformation: oftechnology leadingto we further could now, inpayments, beina course. However, having watched thedigital oftheeconomy transformation onewould ofotherparts notbet awaySuch developments shift would from leadto cash andpublicmoney. afurther They may never happenof discussion paper on the public policy implications bankdigital ofnon-commercial money discussion paperonthepublicpolicy money. (Idonotpropose to wrestle beissuinga withthat questiontoday -theBankofEnglandwillshortly wrestling withthethorny framework questionofwhat regulatory should applyto non-bankissuersofprivate This attention, hasattracted enormous including from publicauthorities, liketheBankofEngland, whoare now providing credit butrather seekto integrate newforms ofmoneyinto theirother, data driven services. so called ‘Big Tech’ internet platforms. Their different businessmodelsare very to banks:many have nointerest in The proponents ofthesenewer forms ofmoneyare notbanksbuttechnology companies typically includingthe increasingly unusableinadigital world. But cash,andby publicmoney, extension isbecoming anever ofthemoneywe smallerfraction useintheUKand embedding moneymuchmore deeplyinto thedigital world inways we canonlynow imagine the potential radically to reduce thecosts ofdigital moneyandto increase its ‘functionality’, the itcando’,‘things ‘Stablecoins’, are probably ofthese. thebestknown aform ofcrypto-assets Their proponents claimthat thesehave 13 . 12 ) 11 . www.worldcommercereview.com money –orto useitstechnical name, aCentral BankDigital Currencyor CBDC. Such anassessment hasnotyet beendoneintheUKandnodecision hasbeentakento introduce apublic digital costs oflettingitdisappear. andrisks mustrestdeclining. onanassessment ofthebenefitsensuring It available anduseablepublicmoneythe form ofdigital moneyto itscitizens that cannotrest therole ofpublicmoneyis simplyonthefact insociety questionsthatThese shouldnotbebrushedaside. are Any important decisionthat thestate shouldissueanew orwater providedirectly to thepublicinUKanymore? electricity Why shoulditprovide money? need to beinvolved intheissueofmoneyto thepublicincompetition withtheprivate sector? The state doesnot Given we have framework thecredible for publicauthority private earlier, moneyIdescribed why shouldthestate decision andsomemight argue, generally available publicmoneyisbecoming ananachronism. The current mixofpublicandprivate rather moneyintheUK istheresult thansomeinformed policy ofhistory money theycanuseintheireveryday lives? The question–anditisnotjustafor central banks–is:doesitmatter ifthepubliccannotaccess public itmatter?Does day life. use andavailable to citizens, thestate willneedto issuepublicdigital moneythat canmeettheneedsofmodern We may notbethere yet. Butitlooksprobable intheUKthat ifwe want to retain publicmoneycapableofgeneral www.worldcommercereview.com Does thepresenceDoes ofpublicmoneyinthehandscitizens inthis? play any part public. confidence Ensuring inmoneyasameansofpayment andstore of value isfundamental to financialstability. First and foremost are implications oftheabsence thefinancialstability ofpublicmoney for use by thegeneral Financial stability byovertaken events. the changeswe are seeingintheway likelyto we be any transact, isvery assessment that isnotforward looking private moneysuchasthe ‘Big Tech’ platforms. Given thespeedoftechnological development inpayments andof doingso,In Iwilllookto thefuture aswell asto thepresent andto the possibleentrance ofnon-bankissuers might inallowing berisks publiclyavailable state moneyto disappear. views onwhere setoutsomepreliminary someofthebenefitsmightperhaps lieandwhere, conversely, there I donotwant to anticipate theoutcome Butonthebasisofwork theBankhasdonesofar, ofthiswork. Ican explore theissuesposed by CBDC and theBankofEnglandto ensure astrategic approach isadopted between theUKauthorities, aswe collectively At thisyear’s UKFintech Week, theChancellor announced theestablishment ofa Task Force, ledby the Treasury issuesgenerated bypublish anotherdiscussionpaperonsomeofthepublicpolicy newforms ofdigital money. a discussionpaperlastyear with anillustrative modelofageneral publicdigital purpose currency. We willshortly The BankofEngland, likemany othercentral banks, theseissuesinrecent hasbeenexploring years. We published financial sector, oftheeconomy many and more parts for society broadly. which would majorpublicproject ofaCBDCwould haveIntroduction beavery material implications for the 14 . www.worldcommercereview.com such aworld, onlyenablesdepositors to exchange theclaims ononebankfor claimsonanother. Absent access to publicmoneythegeneral publiciseffectively lockedinto private money.Deposit protection, in money. have theoptionto switch into inpreventing state moneymay beimportant amore general lossofconfidence in runs outofprivate moneyamplifyingthestress. Ontheotherhand, that understress theknowledge depositors This isacomplex issue. suchepisodes, Ontheonehandduring easyaccess to safer, publicmoneymay stimulate issuers ofprivate moneycomes underthreat. The second area istherole that access to publicmoneymay play timesofstress during whenconfidence inthe frameworkBank ofEnglandmoneyalsoanchorstheregulatory for banks. The requirement onbanksto beableto exchange, ondemand, themoneytheyissuethrough depositaccounts for without any changeinvalue sayform claimsissuedby BankAcanbeexchanged ofmoneyintheUK, for claims on thestate orclaimsonBankB money –ie. cash-ondemandisinmy viewonekeyelement intheframework that guarantees to usersthat one that holdersofanyThe fact private moneyissuedby acommercial bankhave therightto convert itinto public monies usedintheeconomy. boththeperceptionensuring ofuniformity ofmoneyintheUKandreality ofthesubstitutability, ofallthe The answers here, lieintwo related Ithink, areas. First, therole that generally available publicmoneyplays in 15 . From theuser’s point ofview, itisalljustthesame ‘money’, poundssterling. www.worldcommercereview.com economy. inaworld inwhichthere is greaterimportant diversity intheissuersandforms ofthemoneycirculating inthe The role ofgenerally available bothuniformityandconfidence publicmoneyinanchoring islikely to bemore alarge attract numberofusers.could quickly have greater andlower costs thanthecurrent transaction functionality commercial bankdigital moneyoffering and the UK, I suspect thestate, Isuspect intheformthe UK, oftheBankEnglandandits ‘promise to pay’ provides that anchor previousIn centuries goldhasplayed that role to anditssymbolismremains this day. powerful times, modern in In anchored by theperception ofaliquidsafe assetthat willalways beaccepted. that whateverperception itsform ofmoneyitself: orissuer, confidence inthe needs concept moneyinsociety This hints perhaps at somethingmore elusive andyet more fundamental abouttherole ofpublicmoneyincitizens’ confidence.undermine there isnoroute outofprivate money, that there isnoaccess to safe liquidassets backedby thestate, could asystemicIn stress, system whentherobustness asawholeisunderthreat, ofthebanking theperception that Techs’, issuingnewforms ofdigital money, suchas ‘stablecoins’ As Isetoutearlier, there real ofnon-banks, isnow prospect thevery includingthelarge technology platforms or ‘Big quo inwhichprivate moneyisissuedonlyby tightly regulated commercial banks. aboutthesepossibleroles to ofgenerally thinkbeyond available thinking thestatusIn publicmoneyitisimportant the publicdidnothave access to themoneyitissues. whethertheBankofEnglandcould continueat to allcertain provide that anchor, intimesofstress, if particularly 17 for general payment purposes. These are likelyto 16 . It isnot . It www.worldcommercereview.com competition, innovation, inclusionandprivacy. thatpublic authorities willbeinvolved inthework of the Task Force. aboutpromoting SpecificallyIamthinking interestThis isanarea butwhere inwhichtheBankhasaparticular responsibility isshared across arange of for economic activity. benefits from aCBDC. These concern thewiderbenefits moneyand from apayments well-functioning ecosystem There are otherareas inwhichthere may inallowing berisks publiclyavailable state moneyto disappearand objectives publicpolicy Other own digital currency. generally available, useablepublicmoneywitheras thedigital ageprogresses orwhetherthestate shouldissueits carefullyThese willneedto evaluated risks bevery inany assessment ofwhether we shouldbe prepared to let confidence. society. andwater, And unlikeotherfundamentals suchaselectricity moneyisa social convention that dependson But there are here risks clearly to confidence inoneofthefundamental oftheeconomy underpinnings and and future forms willbesufficient timesandinstress. anchorsbothinnormal to provide thenecessary arguable that that somecombination iscertainly ofregulationIt andbackstopping ofprivate moneyinitscurrent does nothave access to state money sketched outabove. ofonlyone, Iknow relatively small, economy example ofamodern inwhich thegeneral public One cannotofcourse prove that generally available publicmoneyplays therole that Ihave infinancialstability 18 andIamnotaware ofmany inthehistorical record. www.worldcommercereview.com pay substantial fees inorder to accept payment from theircustomers to whetherdirectly private companies for competitionEnsuring intheprovision thewidereconomy. isimportant ofpayments services Today, businesses in consumers. set themselves upassocalled ‘walled gardens’ – systems that are notinteroperable withothersandtherefore lock New moneyandpayment innovators, data advantages could withpowerful have strong commercial incentives to consumers to move fundsacross systems orproviders andat nosubstantial cost. withlittlefriction Interoperability iskeyfor fostering competition inpayments systems. interoperability By of Imeantheability value frombetter userdata, extract theymay beableto more heavily cross-subsidise theirpayments business. For example, if, bigtech platforms have different, avery data driven businessmodel to banks.If theyare able to effects inpayments.deepen thenetwork payments businessbecomes increasingly integrated into thedigital economy, theuseofdata hasthepotential to forward,Looking the challengeofdelivering competitive outcomes islikelyto grow more complex. As the incumbents from competitive pressure. difficultThis fornew dynamic makesitvery paymentsfirms to turn insulatemarket, whichcanin enter the a payment methodwhenitisalready widelyused, andsocustomers gravitate towards large payment platforms. Payments systems are however, by definition, susceptible effects.to network Consumersand retailers prefer touse they increase theprices that customers pay. inbothcases.impacted Customers donotsee thesefees ofcourse, butlikeothermerchant costs, allelseequal, andsecurely storing through cash.Smallbusinessareor indirectly transporting thecosts particularly ofsorting, 19

www.worldcommercereview.com competitive ofafuture payments outcomes landscape. aspart digital currency. This illustrated therole private might firms play indelivering interoperability, innovation and itsdiscussion PaperIn lastyear, theBank ofEnglandsetoutasanexample aplatform modelofacentral bank onitsinteraction with theprivate sector.depend onitsdesign -mostparticularly extent to whichdigital publicmoneyintheform of acentral could bankdigitalplay currency theseroles would interoperability andcommonnecessary standards between allmajorpayment systems inthefuture economy. The itwould helpensure to the support digital publicmoneyandtheinfrastructure necessary Equally important, costs. option ofusingdigital publicmoneyasanalternative to private role moneycould inanchoring play animportant transactions. ahead, Looking aspayment to anchorthecost optionsproliferate, offace-to-face the pastserved the However, publicdigital moneycould role alsohave inthisrespect. animportant The optionofpaying incashhas infrastructure to includenon-bankpayment firms. access bank-based depositaccount information. The BankofEnglandhaswidenedaccess to itscentral payments regulator ofthemainUKpayment systems. regulation prescribes Other common standards for non-banksto Payment card fees, for example, are cappedintheUKandPayment System astheeconomic Regulator acts Competition andcost control canbeensured by regulation, by access to infrastructure andby common standards. conditions inwhichsuchinnovation canflourish. innovations that are giving newoptionsto consumers over how theypay. competition Ensuring willbekeyto the in payments. The newtechnology andgrowth ofdigital payments isincreasingly allowing for specialisation aspurtoCompetition innovation. earlier, acts As Iobserved we may stillbeinthe ‘Blackberry’ phaseofinnovation 20 and www.worldcommercereview.com Digital publicmoney, appropriately designed, may therefore role have to play animportant inclusion. inensuring have thecommercial incentives ofthepopulation. to for provide theunbankedandotherparts useableservices As we have seenover many system, years future withthebanking private moneyandpayments providers may not number ofexamples inwhichcashisnotaccepted transactions. for face-to-face This isnot simply dueto the growing ofinternet transactions. importance We already seeasmallbutgrowing become increasingly digitised, thesocialconsequences ofexclusion from digital money willbecome more severe. The experience ofthelast12months hashighlighted ofdigital therisks exclusion generally. As theeconomy digital payments orcanaccess themonlyat cost. disproportionate Today, there are whoby currently andlarge rely 1.2millionunbanked peopleintheUK, oncashandcannotaccess a backstop alternative. rather thanafully functioning understandingof technology. phonenoranyidentification, particular nor ownership ofasmart Butitisincreasingly form theyneed to maketransactions. Physical cashprovides abackstop. requires littleofusers-neither It very for socialas It isimportant well aseconomicThe firstis inclusion. reasons that allhave access to moneyinthe ‘values’. highlight Iwillbriefly a few ofthese. There are ofmoneywe alsosomewidersocialquestionsaboutthetype usethat fallbroadly of into thecategory England infrastructure andintegrate theyoffered. digital publicmoneyinto theservices would beprovided by private firms, sector banksandnon-banksalike, who would beable to pluginto theBankof infrastructure inthemodelwould beoperated by theBankofEngland. All however, customer facingservices, themodel,In digital publicmoneywould operate alongsideprivate money-ascashdoesnow. The central www.worldcommercereview.com expensive, slow to and difficult react topolice. Itcan also create to barriers competition. But regulation aloneisnotalways thesilver canbe bulletfor objectives. It complex, multidimensionalpublicpolicy offinancialstability.objective to regulation to achieve objectives. desired And indeed, publicpolicy thesamemay betruefor thepublicpolicy to deliverWhen publicgoods, seeking suchasinclusionandprivacy, for andsimilarly competition, onemight look Conclusion transactions hasgonedown transactions demand for Bankof Englandmoney, thecurrent cash,hasgoneupduring pandemiceven astheuseofitindaily public money, nocoincidence isperhaps that the intheirusual, It everyday lives andin timesofuncertainty? And finally, mostsimply, andperhaps shouldcitizens haveright the to holdingandusingthesafest ofmoney,form money andpayments, itisnotclearthat absent publicdigital moneysuchanalternative would exist. an alternative optionoffering greater available we need. privacy for theservice Given effects thenetwork around most ofushave probably experienced whenbeingaskedto give to permission useourdata, there not isoften rather thanlaw enforcement purposes. This is, andwillIamsure, continue to becovered by regulation. Butas There is, however, concern –theuseofdata onindividuals’ privacy anotherimportant for transactions commercial however, beconsiderably easierto implement for publicdigital money. The balance willIamsure needto bestruckinthesameplace for digital private may, andpublicmoneyalike. It for effective law enforcement ontheonehandandcitizens’to combat illicitactivities ontheother.right to privacy A second isprivacy. area inthisvalues category This isacomplex area. between theneed There atrade-off isclearly 21 . www.worldcommercereview.com Sir JonCunliffeGovernor isDeputy Bank ofEngland ofthe for Financial Stability implications ofsuchachangeand the alternatives that may beavailable to us. ■ happen by accident. Whatever theoutcome, it shouldbebasedonacareful andthorough assessment ofthe New technologies andtheentrance ofnewplayers are likelyto reinforce thesetrends. We shouldnotletthis eventually eliminate therole that publicmoneyplays intheeconomy today. horizon we are seeingaccelerating changesintheway we live that willgreatly andtransact reduce andperhaps message,My however, isthat even without thenew, technology enabledforms ofmoneythat are onthenear months. like stablecoins. These willbeexplored inaBankofEnglanddiscussion paperwe hope to release few inthenext from commercial bankmoneyinto any newforms ofnon-bankdigital moneywhetherpublic, likeCBDCorprivate, There questionsthat Ihave are otherimportant notcovered implications ofany away shift aboutthepublicpolicy has beenestablished. work ofthe Treasury/Bank ofEnglandtaskforce. We willexplore themalsointhebroader engagement group that These issuesandtheirimplications for thedesign ofany digital publicmoneyEnglandwillbeat thecentre ofthe and amore robust answer. effective publicmoney alternative in combination with regulation wherewould provide necessary amore efficient much ifthepopulation at large lostaccess to useablepublicmoney. But it might alsobethat and awell-designed may bethat aconsistentIt framework regulatory areas across could arange meanthat ofpolicy itwould notmatter www.worldcommercereview.com enabled contactless card paymentsandgreater adoptionofmobilepayments. have enabledtherapid growth onlinepaymentsandtheintegration ofsafe ofNearField Communications (NFR)has 10. For example developments suchastheuseof3-D secure protocols, delivered through Access (ACS), Control Servers of England) shoppingaccounted9. Online 2020,compared for28%ofUKretail inSeptember spending with19%ayear earlier(Bank ). the contactless consumer’ percent8. In2020justunderninety ofUKpaymentsinthewere contactless (Barclays Insights–‘ are to notsubject many ofthesamesafeguards asretail deposits, insurance. mostnotablydeposit money, withclientfundsheldatacommercial bank(andtherefore backed atthecentral bank).However, firms e-money 7. E-moneyfirmsare paymentservices. authorisedor They offerelectronic registerede-money andundertake to issue credit orcharge card in2019. at leastonecredit orcharge card hasincreased slightlyover the pastfewyears with68%ofadultshavingatleastone now6. Nearly all adultsintheUK(97%,some53 million people) holdatleastonedebit card. ofadults with The proportion period. framework, stability inflation currentwas onaverage monetary twicetwice aslarge as and volatile asinthefollowing 5. The UK’s experience ofhighandvolatile inflationis well documented. Inthe ten beforeyears ofthe theintroduction 4. UKFinance –UKPayment (2020) Market Summary with thenarrow development of‘e-money’ institutions. 3. This issometimesalsorefer to aselectronic money, butIwillusetheterm digitalmoneyhere –whichavoids confusion with HMTreasury. Coins are produced2. The BankofEnglandisresponsibleintheUK. forissuingBanknotes by theRoyal by Mint, agreement discharge ofofficialfunctions. 1. For much oftheBank’s we have aquasi-public history been institution,underprivate ownership buttasked withthe Endnotes Covid andtheriseof www.worldcommercereview.com business andishigherforsmaller firms. For SMEswithlower turnover, theaverage MSC isthree timeslarger, ataround only, feeitem whenaccepting digitalpayments)across UKcard transactions to around be 0.6%.This varies by size of 19. The Payment System Regulator hasestimated theweighted average charge merchant (thelargest, service butnot Ireland. andNorthern exists inScotland 18. InHongKong, are banknotes issuedby three commercial banks(underlicense from theHKMA).Asimilararrangement currently usedintraditional systemic paymentchains, whethercentral bankmoneyorprivate commercial bankmoney. systemic paymentchainsinplace ofmoney, theymust offertheequivalent protections to stableand reliable money 17. The BankofEngland’s Financial Policy Committee thatwhere stablecoins hassetaclearexpectation are usedin ofaphysicalpossession establishingthe rightto object aclaim. inestablishingthiscommitmentsymbolism significant, maybe thatis to sayusersofmoneyplace value on role of the issuingauthority, suchthattheycan forthe have confidencevalue ofthemeanspayment. Physical insupport 16. The promise to payis, like allpromises, intimately tiedto credibility. of andintegrity Usersmust trustintheability anchoring theirredemption againstothersimilarlyregulated private monies, given thecommon reference point. 15. Today financialinstitutions are required, by regulation, to ensure ofalso redemption atparinfiat,whichhastheeffect debates. these policy an engagementgroup forensuringvoices makers are from ableto across on engagepolicy businessandcivilsociety 14. BankofEnglandstatement onCentral Currency BankDigital 13. These are setoutindetailthe2019‘Access to Cash Review’ fromeffects stablecoins and/orCBDCsonfinancialstability. FSRtheBankofEnglandcommitted12. IntheDecember to publishinginduecourse onthepotential a discussionpaper and provide forgreater oftransactions sophistication andcomplexity thatcan inthetype conducted be seamlessly. give asenseofwhatisalready possible. Advances likely inpaymentstechnology appear to accelerate thesedevelopments programmable money, contracts, smart device to device paymentsandmicropayments. Amazon’s ‘Just Walk stores Out’ 11. IntheBankofEngland’s Paper 2020Discussion onCBDCwe highlighted emerging suchas functionalities , whichdraws of2,000consumers. onasurvey . The announcement alsohighlighted theformationof www.worldcommercereview.com given MoneyInstitute, isbasedonaspeech their comments. attheOMFIFDigital London. This article Bailey,Andrew NicholasButt,Victoria Cleland, Lee Foulger, Hauser, Andrew Tom for Mutton andChristinaSegal-Knowles Miranda andCormac Hewkin-Smith Manek, SullivanRidheema fortheirhelpinpreparingIwould thetext. like to thank Financial Policy Committee. Iwould like to Copple, thankShivChowla, David Dovey, Ben JulianSchelle, George Barton, The views expressed here are notnecessarily Policy thoseoftheBankEngland, Committee orthe theMonetary growth rate ofNICover thepreceding five years was 0.5%. For more detail, seeCash inthetimeofCovid has shown strong growth, asistoday nearly20%higherthanimmediately before thepandemic. For context, theaverage thedeclineintransactional21. Despite useofcash throughout thepandemic, thevalue ofnotes incirculation (NIC) conditionality, eg. bundlingwithotherservices buynow paylater). to business, to government person person, to theirsize person), (buyingahouseorchocolate (refunds, bar),complexity technologicalpayments whichmayleadto distinct solutions. Payments them(eg. basedonwhoismaking vary business 20. We usually refer apaymentasone, to making –butthere single, are awiderange of uniformactivity oftypes 1.9%. www.worldcommercereview.com European fiscalframework A newtemplate for the argue this is an opportunity for ambitious etal argue thisisanopportunity Martin The European fiscalruleshave beensuspended to enable memberstates to combat theCOVID crisis. reform of a now outdated clearly fiscal framework www.worldcommercereview.com T bound, andcommon debtissuance withtheadoptionofEuropean recovery planin2020. low oreven negative interest oftheeffective inthevicinity rates, lower policy limited effectiveness ofmonetary The post-COVID context results between these rulesandfour higherpublicdebts, inadisconnect very newfacts: Thygesen etal.2018). economists andofficials were calling foritset al.2018,Feld reform (eg. etal.2018,Darvas Bénassy-Quéré et al.2018, changes) butoverall, framework theunderlying hasremained thesame. Even before theCOVID-19 crisis, many Since theMaastricht Treaty, theEuropean fiscalruleshave been constantly revised (withoutsignificant Treaty We are nolonger intheworld ofMaastricht institutional roadmap for thisreform. vulnerabilities andimplementedon country inamore decentralised way. We provide adetailedeconomic and anddemandspillovers. from risks arising debtsustainability Fiscal targets shouldbedifferentiated depending We propose acomprehensive reform inwhichthenewEuropean fiscalframework externalities would prioritise decentralised way. Fiscal targets shouldbedifferentiated vulnerabilities andimplemented dependingon inamorecountry externalities arising from debt sustainability risks anddemandspillovers. from risks arising debtsustainability externalities and proposes a comprehensive reform inwhichthenewEuropean fiscalframework would prioritise foreseen in2023,shouldbemadecontingent onapoliticalagreement onreforming thefiscalframework, ofthe his column, part Vox debate oneuro area reform, argues that thereactivation oftherules, now www.worldcommercereview.com of therulesshouldaddress two mainfiscal externalities. oftheeuro The first, whichcrisis, wasarea attheheart arecentIn French Council etal. ofEconomic 2021),we Analysis argue paper(Martin that to beeffective, an overhaul The for case acomprehensive overhaul rules ofthefiscal ofthelowerthe vicinity requires bound unconventional both andfiscalpolicies” 2021). (Schnabel monetary wheninterestand fiscalpolicy rates cannolongerbe reduced, saying that “effective macroeconomic stabilisationin ECB Executive Board recently memberIsabelSchnabel advocated therelationship rethinking between monetary (Draghi 2014), policy appears to beobsolete. Draghi’s Echoing Mario 2014callfor a“greater role” alongsidemonetary for fiscalpolicy reassessed. This hasstrong implications for theeuro area, where thisrole hasbeencodified onapremise that now and persistent thiscontext, in demanddeficitsmustbe theroleIn reducing both temporary offiscalpolicy financial environment financial must learn all the lessons of the new economic and and economic new the of lessons the all learn must We believe that the European economic policy system system policy economic European the that believe We www.worldcommercereview.com the European However, fiscalframework. we consider a complete break withthe as unrealistic.Pact We agree onthefocus andonremoving onsustainability that criteria have themultiplenumerical accumulated in by thestandard EUprocedure by theCommission ofaction before ofJustice. theCourt and(inthemoststreamlined version oftheirproposal)probability” to replace themechanismofgradual sanctions replace that themwiththesoleprinciple memberstates “ensure thattheirpublicdebts remain sustainablewithahigh rulesbycall for qualitative replacing standards. budgetary They propose to criteria, to ofallnumerical getrid While the needfor reform isincreasingly recognised, itsnature remains fiercely debated. Blanchard etal.(2021) bound. markets, yet itissignificant whenthe central bank’s rate cannolongerbe policy reduced due to theeffective lower was becauseofopposite longconsidered spilloverThis externality secondary effectsthrough thegoodsandcapital countries mustbe considered.of national fiscalpoliciesonpartner to aggregatelong asfiscalsupport demandiscalled for andno central budget exists to takeonthis role, theimpact The second externality, whichwas largely inthedesign oftheEMU, neglected to aggregate pertains demand. As expectations, whichare andshouldremained addressed by theECB(Farhi 2018). andMartin resulting risk from theinsolvency excessiveThe rulesshouldtackle debt, notthethreats resulting from self-fulfilling possible exit that could follow. tois therisk thearea’s posed by sovereign stability and, financialandmonetary insolvency even more so, by the www.worldcommercereview.com monitored by theEFB, andsecond endorsed (orrejected) by theEU. be firstassessed by thedomesticindependent fiscalinstitution(IFI) onthebasisofa commonmethodology, We therefore propose that eachgovernment setsamedium-term debttarget, theappropriateness ofwhichwould muchcountry-specific. These are determinants ofdebt sustainability allvery between theinterest rate andthegrowth rate andonastate’s surplus. to maintain capacity asufficientprimary Uniform are criteria numerical dependsfundamentally misplaced onthedifferential because debtsustainability threshold setsatarget that istoo farremoved from reality and lacksanalyticalfoundations. for thedebt(60%of GDP)andthedeficit(3%ofindicated inthe Protocol 12annexed to the TFEU. The debt However, we believe itisessential to (andintime dejure) at leastdefacto remove theuniform thresholds numerical orthedesirable ofnational direction policies.externalities preventive prejudges Pact oftheStability thenature arm was northeletter built. Neitherthespirit ofthisarticle of economic asamatter policies ofcommon concern andshallcoordinate themwithintheCouncil” ) onwhichthe Similarly, we donotpropose to eliminate thecentral 121(“Memberstates provision shallregard their ofArticle countries. pressure mechanismasappropriate inacontext where excessive publicdebtmay have adverse effectsonpartner pressure itsprocedures –never entail andthepossibility used–offinancialpenalties. We regard a gradual peer 126(“Memberstates shallavoidThis excessive appliesfirstofall to Article government deficits”), includingthegradual We donotpropose to rewrite thecentral provisions ofthe Treaty ontheFunctioning oftheEuropean Union(TFEU). Country-specific debttargets www.worldcommercereview.com profile ofclimate investments inorder to ensure theyare notpostponed. public investment inabroad sense. The assessment shouldalso ofpublicfinanceconsider thetime sustainability itwillbetheroleNevertheless, oftheIFIsandEUto takeinto account onpotential outputof theimpact would raise endlessdiscussions. expenditures, between investment asthedistinction expenditures andothergrowth-enhancing expenditures We donotfavour introducing agoldenrulethat would treat investment expenditures differently from otherpublic unanimous agreement. rather thanuniform.country-specific Ultimately, this would require amending Protocol 12,whichcanbedone by Legally thereference speaking, value 126would for needto beinterpreted publicdebtmentioned inArticle as ofthedeficitcriterion. the primacy over priority thedebtcriterion. We would instead debttarget to give andde-emphasise acountry-specific priority proposalOur would changethehierarchy ofobjectives. far, So hasinmostcasesbeen thedeficitcriterion given would bedetermined accordingly. taxmeasuresexpenditure (andexcluding netofnewdiscretionary automatic stabilisersontheexpenditure side) Once debt targets have asanchorsfor beenset, expenditure theyshouldserve rules. nominal The path for primary raterate–growth differential. balanceThis to andtherisks target theinterest shouldbeexplicitly based onestimates ofthemaximumprimary www.worldcommercereview.com anchor theculture offiscal indomesticinstitutions.responsibility We propose that: strengthening theresources, capacitiesofthenational independence IFIs, andsurveillance inorder to further We propose aredefinition of responsibilities ofboththeIFIsand European BoardFiscal (EFB). We recommend A new institutionalframework European instrument to finance specificpublic investment programmes bymeansofmutualised debt. lackinpublicinvestment. orto astructural leading to prolonged demandshortfalls This could taketheform ofa joint asabasisforfiscalinitiatives theexperienceNevertheless, withtheRRFcould taking in serve response to crises andonthememberstates’would continue policy to rely onmonetary fiscalpolicies. template for anewEuropeancyclesIt fiscalinstrument. would notbeabudget, andthestabilisation ofbusiness The andResilience Facility Recovery (RRF),introduced asa in2021to respond could serve to thepandemic shock, prevent memberstates from runningexcessively tight fiscalpoliciesinaslump. wouldpossibility betoto national applyacommon factor flexibility expenditure rules. However, this would not thefiscalframework shouldleave isnotat objective risk, sustainability room demandmanagement.for active A role to play hasanimportant ina regime fiscalpolicy oflow interest discretionary Because rates andaslongthe Space for policy discretionary • • each government setsadebttarget andexpenditure ruleover horizon; afive-year implementation by theIFIs; the EFBdefinesa common methodology to assessnational fiscalsustainability, and controls its www.worldcommercereview.com past under-spending) andcontain future orpermit spendingoverruns. Finally, anadjustment account shouldbe introduced ofpastspendingslippages(or that would keepthememory expenditure rule, itshouldrefer itto theEurogroup, whichwould makeitsopinion public. Moreover, iftheCommission assessesthat thebudgetfor thefollowing year materially risks violating the rule. propose theexcessive deficitprocedure betriggered by amanifest expenditure violation ofthe country-specific requirement.sustainability Ontop oftheapproval ofthedebttarget andtheexpenditure ruleby theCouncil, we To remain effective, amore adaptable oversight system must rely oncredible sanctions for violation ofthe Enforcement A detailedmapoftheinstitutionalgeography isgiven inFigure 1. • • • • the Commission monitors fiscalrule. theimplementation ofthe country-specific the Council (ineuro format) thememberstate’s endorsesorrejects fiscaltargets; and expenditure rule; the Commission recommends to theCouncil whetherornotto endorsethenational debttarget and its detailedassessment ismadepublic; the IFIassesseswhethergovernment’s debttarget iscompatible standards, withtheEUsustainability and www.worldcommercereview.com Figure 1 www.worldcommercereview.com Philippe Martin isProfessor ofEconomicsPhilippe Martin Po, atSciences ChairFrench Council ofEconomic Analysis, andCEPRVice AUTHORS ABOUT THE in theirfiscalchoices, andmore responsible. ■ environment. The reforms ofthefiscalframework that we are proposing aim to makestates bothmore autonomous We believe that theEuropean system allthelessonsofneweconomic economic mustlearn andfinancial policy fiscal support. aim to avoid policiesthat would oftheeuro endangerthestability area, whetherthrough excessive debtorlackof The reforms we propose are substantial but compatible withthe essential provisions oftheEuropean treaties. They Conclusion common fiscalinstrument. through theto-be-constructed The Commission shouldalsobeentrusted withtheresponsibility ofproposing ofexceptional theactivation support would aggravate current account imbalances withinthezone. recommend ofamemberstate (beit that thereorientationtoo or too restrictive ofafiscalpolicy expansionary) the Council ontheoverall fiscalstance oftheeuro horizon, area, andfive-year that it both at aone-year For themanagement ofdemandexternalities, we propose that theCommission makearecommendation to consequences borrowing through impacting costs. weight becausetheseinformed judgements onpotentialcarry would to risks debtsustainability have financial On top analyses of beinglegallypowerful, andpronouncements by theIFIs, theCommission andtheCouncil will www.worldcommercereview.com Thygesen, N, R Beetsma, M Bordignon, S Duchêne and M Szczurek (2018), Second Annual Report of the European Fiscal Fiscal European the of Report Annual Second (2018), Szczurek M and Duchêne S Bordignon, M Beetsma, R N, Thygesen, Conference organised by the European Fiscal Board. Fiscal European the by organised Conference Schnabel, I (2021), “Unconventional Fiscal and Monetary Policy at the Zero Lower Bound”, Speech at the Third Annual Annual Third the at Speech Bound”, Lower Zero the at Policy Monetary and Fiscal “Unconventional (2021), I Schnabel, conomique, no 63. no conomique, e “Reforming the European Fiscal Framework” Fiscal European the “Reforming (2021), Ragot X and Pisani-Ferry P,J Martin, September. “Refocusing the European Fiscal Framework” Fiscal European the “Refocusing (2018), Wieland V and Schnabel I Schmidt, C L, Feld, “The role of the ECB in the reform proposals in CEPR Policy Insight 91” Insight Policy CEPR in proposals reform the in ECB the of role “The (2018), Martin P and E Farhi, August. Draghi, M (2014), “Unemployment in the Euro Area”, speech at the Annual Central Bank Symposium in Jackson Hole, 22 22 Hole, Jackson in Symposium Bank Central Annual the at speech Area”, Euro the in “Unemployment (2014), M Draghi, Sustainability”, Notes du CAE, no 47, September September 47, no CAE, du Notes Sustainability”, Darvas Z, P Martin and X Ragot (2018): “Reforming European Budgetary Rules: Simplification, Stabilization and and Stabilization Simplification, Rules: Budgetary European “Reforming (2018): Ragot X and Martin P Z, Darvas Paper No. 21/1. No. Paper Blanchard OJ, Á Leandro and J Zettelmeyer (2021): “Redesigning EU Fiscal Rules: From Rules to Standards”, PIIE Working Working PIIE Standards”, to Rules From Rules: Fiscal EU “Redesigning (2021): Zettelmeyer J and Leandro Á OJ, Blanchard CEPR Policy Insight No. 91. No. Insight Policy CEPR “Reconciling Risk Sharing with Market Discipline: A Constructive Approach to Euro Area Reform” Area Euro to Approach Constructive A Discipline: Market with Sharing Risk “Reconciling (2018), Véron N and Bénassy-Quéré A, M Brunnermeier, H Enderlein, E Farhi, C Fuest, PO Gourinchas, P Martin, J Pisani-Ferry, H Rey, I Schnabel Schnabel I Rey, H Pisani-Ferry, J Martin, P Gourinchas, PO Fuest, C Farhi, E Enderlein, H Brunnermeier, M A, Bénassy-Quéré References des Conjonctures Economiques, OFCE) and Professor Po, atSciences Paris, andiscurrently President oftheFrench (Observatoire Français Economic Observatory at BruegelandthePeterson Institute andprofessor ofeconomics Po atSciences inParis, andXavier Ragot isCNRSDirector President andResearch Fellow, Pisani-Ferry Jean isTommaso Padoa-Schioppa chairattheEUIinFlorence, Fellow Senior , Les notes du conseil d’analyse d’analyse conseil du notes Les , , VoxEU.org, 12 12 VoxEU.org, , , VoxEU.org, 19 April. 19 VoxEU.org, , , , www.worldcommercereview.com This article is based on the lead commentary intheVoxEU isbasedontheleadcommentary This article debate oneuro area reform Committee. Budget European Board, www.worldcommercereview.com www.worldcommercereview.com transition towards asustainableeconomy that willbe capital markets union capital markets Christine LagardeChristine considers theEuropean Union’s backed by thegrowth ofsustainablefinance Towards agreen www.worldcommercereview.com W widely. Integrating green inaddressing could two ofthewiderchallenges we capitalmarkets play face apart today. And, liketherailroads inthepast, thiscould have unionthat ramifications reverberatefor ourmonetary more that transcends national borders –orwhat Iwould callgreen union(CMU). capitalmarkets Ibelieve fact, that thegreen In to buildatruly European transition offers capitalmarket usauniqueopportunity the consequences for Europe’s financialsystem could besweeping. constrain to finance ourability future investments. Butif green finance continues toemerge tofundthis transition, Europe intechnology, infrastructure andnetworks. Fragmentation between nationalmight financialmarkets toThe netzero shift emissions, together withanadequate digital willrequire backbone, majorinvestments across towards asustainableeconomy, backedby thegrowth ofsustainable finance. youIf allow methe analogy, andtheEU’s Iseesomeparallels ofUShistory between thisperiod transition today union, butalsoitscapitalmarkets. development oftheUS-wide financial system mobilised viacapitalmarkets, notablyintheform ofrailroad bonds. This, laidthefoundations inturn, for the With afragmented system, thehugeamount offinancingneeded localbanking for thisproject could onlybe integration oftheUnited States inthelate 19 unions canbefar-reaching. Let meborrow anexample from UShistory. The economic andfinancial hen technology andfinance unite around a common purpose, the consequences for monetary railroads. 1 . The notonlythefar-flung railroads ofthe corners endeduplinking th century owed century agreat dealto thenewtechnology of www.worldcommercereview.com activity towardsactivity aspossible, thegreen whichwillhelpraise asquickly Europe’s anddigital sectors growth potential And second, we needto transform changesspeeduparound oureconomies asstructural us. We mustredirect do better at reducing risks, across andalsoat risks sharing countries. First, unionmore resilient shocks. to ourmonetary we cyclical face thechallengeofmaking To achieve this, we must the euro area. They require onmany parallel efforts different fronts. Buta commonthread istheneed toenhance acrossAddressing for policy theECB, thesechallengesisimportant astheyaffect thetransmission ofourmonetary potential to transform the EU as a whole a as EU the transform to potential and with immediate impact, but it also has the the has also it but impact, immediate with and opportunity to craft something genuinely European European genuinely something craft to opportunity Green CMU not only gives us a tremendous tremendous a us gives only not CMU Green 2 . www.worldcommercereview.com €330 billion every year by€330 billionevery 2030to achieve Europe’s climate andenergy targets Capital are markets alsovital to fundthetransformation ofoureconomies. We needto seeinvestment ofaround order to integrate themfurther. time. Capital have markets developed nationally, sowe firsthave in those markets to openthemupandharmonise Although we progress, are making thanksto thework oftheCommission, completing afully-fledged CMU will take supporting transformativesupporting activities investorslinking theyintend to to theimpact achieve. And theyare alsobetter at drawing retail investors towards close theinvestment gap. Capital are markets better suited to withadefinedpurpose, financingprojects directly While banks canandshouldprovide agoodshare ofthisfunding, canprovide capitalmarkets innovative tools to 1999 and2016,compared withat least60%intheUnited States around 20%ofshocksintheeuro area were mitigated through cross-border holdingsbetween debtandequity At present, however, are financialmarkets lessintegrated intheeuro area thaninother large economies. Only a common framework. regulatory oftheUnioncanbeoffset bygainsinanother.because financiallossesinonepart Scaleanddepth matter, asdoes considerations. irrespective ofhomecountry debt andequity That, helpsshare inturn, thecosts oflocalrecessions, Integrated ofbuildingresilience, are capitalmarkets at theheart becausetheyencourage Europeans to invest in Europe. the contribution ofthefinancialsector, significant stepsby taking towards inparticular unionin acapitalmarkets to carry outthedigital transformationto carry 6 . 5 . 3 . 4 , and around €125 billion every year, andaround €125billionevery www.worldcommercereview.com the EUhave, onaverage, halfthehomebiasofconventional bonds. Crucially, thegreen hasalready bondmarket achieved greater pan-European scale. Holdingsofgreen bondswithin about thefuture. takes off and worldwide we seeagenerational transfer of wealth to millennialswhoare bound to be concerned bonds issuedworldwide were ineuro. There isimmensepotential for thisrole to grow once thegreen transition ofgreen addition,theeuroIn hastakentheleadasglobalcurrency finance. Last year, around halfofthe green are domiciledintheeuro area management ofinvestment fundswithESGmandates have since almosttripled 2015,andover halfofbondfunds Environmental, socialandcorporate governance (ESG)investment isalsoconcentrated inEurope. The assetsunder volume ofgreen bondsissuedintheEUhasgrown almosteight-fold since 2015. unsecured bondsissuedgloballyin2020originating here. isgrowing And themarket rapidly –theoutstanding Europe isestablishedasthe location ofchoice for green bondissuance, with around 60% of allgreen senior resilience. in Europe, andtheyare already relatively well integrated. This meansthat astheydeepenfurther, sowillEurope’s To my mind, Europe’s green Green meetallthesecriteria. capitalmarkets are capitalmarkets dynamicandgrowing Developing European green markets capital projects? future-oriented obstacles exist andwhere we canachieve highlevels ofintegration quickly, butthat alsoencourage thefundingof This begsthequestion:how dowe faster? deepencapitalmarkets Are there segments market where fewer 7 . www.worldcommercereview.com shortly beplacing€225billionofgreen itby bonds, fartheworld’sshortly making largest issuer. forprojects theprivate to Generation EUfund, invest sector oftheNext theEuropean in.As Commission part will bonds by governments willbekeyto fundingmajorinfrastructure projects, helpscreate whichinturn apipelineof orderIn to buildmomentum, the ‘public dimension’ sector ofthepicture. shouldbepart The issuance ofgreen transition to amore sustainableeconomy. convergencesupport withinEurope, enablingcapitalto flow to regions that are currently lagging behindinthe finance economic transformation –notonlythosewiththemostsophisticated financialmarkets. That would With theirpan-European reach, green could markets alsohelpallcountries to access thecapitaltheyneedto ECB research demonstrates leadsto more –typically green innovation emissions andafaster incarbon reduction These would capitalmarkets notjustadddebtinto thegreen finance mix,they would alsoaddequity, which–as andevenly acrosshappens bothquickly EUcountries. asacatalystGreen could for capitalmarkets alsoact the overall transformation structural ofEurope, that ensuring it fromcapital market theoutset. to create anewframework that didnotexist before. we to So have buildagenuinelyEuropean areal opportunity isadifferentAnd thismeansdeepeningthemarket type ofchallenge. We donotneed to undothepast– we need sustainable supplychains, which are crucialto thegreen transition mobility, urban ofdigital technologies suchassmart precisionAnd they could thetake-up agriculture spark and 9 . 8 . www.worldcommercereview.com fundamental reforms willalsobenecessary. about acompany, includingitsgreen credentials, whichwould beimmenselyusefulfor investors. Butmore integrating disclosures sustainability with financial data, we would create a shop’‘one-stop informationfor all critical willalsobeakeypillaroftheCommission’sIt proposal forthcoming for aEuropean singleaccess point. By landscape. this proposal andbelieve itcanfinallyaddress themaindata the gapscurrently afflicting EU’s sustainablefinance A keyelement isindeedtheCommission’s proposal oncorporate disclosures. sustainability Istrongly welcome for now. initiatives planshouldbefast-tracked –even undertheCMUaction iftheyare appliedonlyto sustainablefinance inmySo view we shouldreinforce thedevelopment ofGreen the CMUagendaby supporting CMU. Specific to strengthen itsinternational role.miss anopportunity move faster thanwe do, theeuro’s advantage astheglobalgreen could fadeandbelost. currency The euro would that are deepandliquidcapitalmarkets gainingglobalstatus. we from others keyto acurrency fact, know history If that theEUcannotprovide foreignIf theservices investors for, andissuersare looking theywillgoelsewhere. In infrastructures andnational constraints. point hitthesamelimitsthat now theintegration restrict ofourbroader –missingcross-border capitalmarkets I muststress, however, that thecontinued growth ofgreen willnothappenby capitalmarkets itself. We willat some Towards Green CMU www.worldcommercereview.com Christine Lagarde isthePresident oftheECB EU Green Standard Bond We needproper ofgreenforthcoming European withofficialEUsealssuchasthe financialproducts supervision scenarios for climate change. To my to passup. mind, that istoo ■ goodanopportunity would allowIt usto makeoureconomy more resilient to shocksandfit for thefuture, allwhile avoiding the worst immediate butitalsohasthepotential impact, to transform theEUasawhole. Green tosomethinggenuinelyEuropean craft CMUnotonlygives andwith short, usatremendousIn opportunity effects for Europeanknock-on capitalmarkets. measures that are neededto advance integration. widercapitalmarket we If succeed, positive there willbevery These initiatives canbeseenasanengine for generally, theCMUproject testing andputtinginplace someofthe frameworks,national outspecialprocedures insolvency even carving for green investments. fragmentation ofgreen investments alongnational lines. convergence And we needfurther of intheefficiency We taxtreatment alsoneedharmonised ofinvestments insustainablefinance products, soas to prevent within thecross-border market. 10 . This iskeyto compliance ensuring andto identifying systemic linksandassociated risks www.worldcommercereview.com 10. See theEuropean Commission’s10. See website COVID-19 era. andgreen Europe inthe than China.European 2020/2021:Buildingasmart Investment Bank(2021),Investment Report 9. In2017,Europe domainthantheUnited States had76% more andover patents inthedigital-green fourtimesmore Structure intheEuro ECB, Area, March. Popov, theaffect footprint ofthe financialstructure carbon economy?” A(2020),“Does Haas, RandPopov,8. De A(2019),“Finance andcarbon emissions” trillion, withanannual growth rate of37%. 7. According to EFAMA market insights, 2020thenetassetsofEuropean inDecember ESG fundsamounted to EUR1.2 Commentary, No73,European Capital Markets Institute, March. 6. Brière, MandRamelli, S(2021),“Can responsible investing encourage retail investors to invest inequities?” 5. European Commission (2020),IdentifyingEurope’s recovery needs ambition: Investing inaclimate-neutral futurepeople”, ofour forthebenefit September. 17 accompanying4. European Commission Assessment” “Stepping thedocument (2020),“Impact upEurope’s 2030climate 3, ECB. 3. Cimadomo, J,Hauptmeier, S,Palazzo, AA andPopov, sharingintheeuro area” A(2018),“Risk 2021. Waldron, How Green BigAre Multipliers?”, A,(2021),“BuildingBackBetter: Spending Working Paper No. 2021/087,March projects. Batini,N,diSerio, M,Fragetta, See onnon-eco-friendly those associated withspending , Melina,Gand M 2. After five years, theestimated twomultipliers associated withgreen are spending to seven about timeslarger than No 395/2018,April. ofaCapital Origins Market1. Gordon, JNandJudge, UnionintheUnited States”, K(2018),“The ECGI Law Working Paper Endnotes . , Working Paper Series, No2318,ECB, September; , 27May. , Financial Integration and , Economic Bulletin,Issue , ECMI , ECMI www.worldcommercereview.com Corporate Sustainability Reporting Directive, FrankfurtCorporate amMain,6May2021 Reporting Sustainability delivered isbasedonaspeech attheEuropean Commission’sThis article high-level conference ontheproposal fora www.worldcommercereview.com and at theborder ofEurope Pricing within ofcarbon The by EUhas announced neutrality 2050asthe carbon key target of theGreen Deal. etal. Schmidt argue that the EUshouldconsider aborder adjustment carbon mechanism to incentivise othercountries to join www.worldcommercereview.com T sectors orforsectors different countries canonly beinterim solutions. thaton carbon encompasses allactors, sectors, regions, andtechnologies. Separate systems pricing for different theEU,that characterises thebestcoordination signal corresponding to would thisprinciple beauniform price As explained, for example, (2020), inthediverse by andSchmidt anddecentralised Schlögl economic system Uniform pricing:acornerstone carbon ofEuropean climate policy science (acatech etal.2020),advocated astheleadinginstrument ofcarbon European thepricing climate policy. (GCEE) (GCEE andGCEE2019),aswell national 2019,CAE work academiesof astheinterdisciplinary of theGerman Previous work by theFrench Council ofEconomic Analysis Council (CAE) andtheGerman ofEconomic Experts greening oftheEuropean economy shouldbecoordinated at theEuropean level. and investment entailing projects highEuropean instruments for value settingincentives addedandpolicy for the the path towards aneffective globalapproach to climate policy. To tapinto afruitfuldivisionoflabour, research The EUcan become theworldto provide shouldbetheexplicit leaderinthe energy aimofthiseffort transition. It international alliance for pricing. carbon mechanismwithinitsjurisdiction. pricing This could provide incentives to othercountries to joinafar-reaching consider a border having adjustment carbon mechanismonlyafter establishedacredible uniform carbon- This column argues, however, that theEUshouldrefrain from from exempting pricing, carbon andshould exports prepare theimplementation goods. ofborder adjustments carbon appliedto imported that allgoodsconsumed intheEUface price, thesamecarbon ascertain itwould besensibleto credibly best coordination signal inthisendeavour would beauniform andencompassing price oncarbon. To he EUhasannounced reaching by neutrality 2050asthekeytarget carbon ofitsGreen strategy. Deal The www.worldcommercereview.com ETS). effective system, thebeststrategy would bewideningthescope ofthe European Emissions Trading System (EU- price (taxes orsurcharges) schemes. (emissioncertificates) orquantity As thisalready provides and afunctional principle, severalIn mechanismscould pricing beemployed to implement auniform European price –both carbon systems stillrely more heavily onfossil resources. member states inthe uniform mechanismmight pricing require financialtransfers to memberstates whoseenergy developments,actual itisnotadvisableto interpret themasbindingrestrictions. by all Voluntary participation Correspondingly, whileseparate gaugesof target values for asimportant andmemberstates sectors canserve approach to climate policy climate to approach to provide the path towards an effective global global effective an towards path the provide to transition. It should be the explicit aim of this effort effort this of aim explicit the be should It transition. The EU can become the world leader in the energy energy the in leader world the become can EU The www.worldcommercereview.com states to fundredistribution schemes This isanational responsibility ofthememberstates (CAE andGCEE2019),thisrevenue would enablemember willalsohelpalleviate pricing carbon theregressivity inherent inclimate policy. climate policies, suchasbans, norms, standards, andsubsidies. providing By additionalpublic revenue, moving to shouldbeusedinthecost-benefit analyses of It thatexisting non-price need onitsportfolio to be conducted shadow price of carbon that supports itsclimate ambition shadow that price ofcarbon supports individual preferences andinstitutions. As prices remain longascarbon too low andlimited inscope of transition. to separate sectors transformation inthenon-EU-ETS (national)schemes, pricing efforts thehigher overall cost the implementation ofauniform coordination signal by afullyintegrated takes, EU-ETS leaving the coordination of wellEU-ETS before 2030and, inparallel withthis, to dismantle themultiplenational climate policies. The longer practice,In itwilltaketimeto integrate theaimshouldbeto form sectors; anintegrated andnon-EU-ETS EU-ETS engage inanextensive reform ofnational energy taxes andsurcharges theuniform pricing. carbon to support withaminimumprice floor over theEU-ETS might besensibleto timehorizon, andalso an fortify extended to It division oflabourinemissionsreduction. values for 2030. With approach, theEUisforegoing thiscompartmentalised of the principle any to enact possibility target for thesesectors. For othersectors, theburden-sharing agreement instead stipulates asetofnational target Currently, andenergy onlycovers sectors, theEU-ETS anditispursuingajoint European theindustry reduction 3 , energy price reforms andinfrastructure investments, according to their 2 . 1 theEUshouldregularly estimate andmakepublicthe www.worldcommercereview.com an even larger extent, private investment neededto meetthemore ambitiousEuropean climate targets by 2030. asthedesperatelyprice would coordination serve neededprincipal signal for themassive publicinvestment and, to andenergy (Europeanby sectors 2021to beyond Commission theindustry 2020a). The ensuinguniform carbon To implement uniform pricing, carbon theCommission announced itsintention to widenthescope oftheEU-ETS mechanismcoveringan encompassing carbon-pricing allrelevant sectors. systems, mobility, heating, andagriculture. importantly, Most the Commission isconsidering theimplementation of target of40%. The Green comprises awide range Deal ofmeasures to cutemissionsinareas suchasenergy pledge to cutemissionsby some 55%compared withtheir1990 levels, asubstantial accentuation oftheprevious repercussionsThis hasimportant for ambitious long-term objective theEU’s climate target for 2030;Europe issetto announcing asitskeytarget reaching for neutrality carbon the EUby 2050(European Commission 2019). December 2019,theEuropeanIn Commission proclaimed theEuropean Green growth asitsprincipal Deal strategy, Climate neutrality andtheEuropean Green Deal:great ambitions prices thatcarbon willcorrespond to theambitionsofGreen Deal. pay were moderate seemslikelythat thisinnocuousresult (ausdemMoore willchangeat etal.2019).It thehigher far,So problems, hadto prices leakage emitters hasnotledto butthecarbon carbon hitherto serious theEU-ETS which are competition facing serious from outside therealm ofEuropean (‘carbon climate policy leakage’). Taking unilaterally theinternational action isendangering competitiveness ofenergy-intensive European firms, to design itsown transition path inaway that combines climate growth. withunimpededprosperity neutrality Arguably, Europe willonlybeableto contribute to ofreaching theobjective globalclimate ifitmanages neutrality www.worldcommercereview.com importance. countries targets to emissionsreduction adoptambitiouscarbon through istherefore pricing carbon ofutmost overall causeofclimate theEU’s changemitigation, countervailing ambitions. The issueofhow to incentivise other would to be harmful EuropeanThis leakage carbon jobsandeconomic prosperity, the anditwould alsohurt relocate increasing shares to oftheirproduction sites outsideofEurope. emissions-intensive domesticproducers whoare trading increase onglobalmarkets ever further, theymight vis theircompetitors that donotfallundertherealm oftheEU’s ambitiousclimate policy. As thecosts ofthose Steeply increasing (shadow) willendangerthecompetitiveness prices ofcarbon ofEuropean companies vis-à- national schemesinto pricing theEU-ETS. To avoid beingprohibitively these efforts costly, itishighlyadvisable to speeduptheprocess ofintegrating sectors. memberstates willhavehas changeddramatically: to increaseto their efforts reduce emissionsinthenon-EU-ETS gains werepossible efficiency limited. Withtheannouncement ofthe European Deal,Green however, thesetting previousIn years, withlessambitioustransition objectives, from thelossesinterms ofprosperity disregarding affair. FranceGermany, and inparticular, have sofarnotpursuedajoint strategy sectors. for thenon-EU-ETS Until afullyintegrated isimplemented, EU-ETS willremain reducingsectors anational emissionsinthenon-EU-ETS unalterable coordinating signal. their effect inincentivising investments today already standsandfallswiththecredibility oftheirinstallation asan Arguably, prices willhave carbon to steeply rise over timeinorder to meetthesetargets (Gollier 2021).Moreover, www.worldcommercereview.com would receive acorresponding remuneration. Consequently, goodsconsumed abroad would face price thecarbon Alternatively, theEUmight optto implement inwhich exporters afull-fledgedsymmetric variant oftheBCA, leakage. induce ofcarbon therisk climate policiesoutsidetheEUto thecompetitiveness and, markets ofEUcompanies accordingly, inexternal would would, toLimiting theBCA applyingonlyto however, imports causedby lessstringent notaddress thedistortion energy-intensive torestricted very tradable goods. andvery policies. As itseemsfartoo complicated goods, thesystem to onallimported imposetheBCA could instead be Ideally, allgoodsconsumed intheEUwould face price, thesamecarbon irrespective ofgloballydiverging climate paymentcarbon ofthesamedomesticallyproduced good. goodsequivalent mechanismwouldThe to ideabehindtheBCA acharge principal the beto onimported levy New challenges: towards reducing emissionsfrom carbon imports installation ofaborder adjustment carbon (BCA) mechanism. be to avoid thesedecisionsex ante. Apromising alternative to thecost-free may allocation ofcertificates bethe would bedifficult to reverse expost, due sector. tothelong investment cycles intheindustry Thus, theaimshould Yet, withincreasing prices thismight carbon change. Outsourcing decisionsmotivated by cost rising differentials example, thesteel, system. cement andchemicalindustries, basedonabenchmarking successfully by thefree allocationto emissions-intensive ofcertificates facing firms international competitionin, for theinternationalUnder theEU-ETS, competitiveness ofdomesticproducers hassofarbeenprotected quite www.worldcommercereview.com instrument to raise publicrevenues. to Contrary apopular view, would notbepaid by foreign suchataxonimports The should, explicit oftheBCA objective however, beto emissions, induce asan ofcarbon areduction notto serve EU budget. from could 2023,aBCA beusedas asourceconclusions ofitsmeetinginJuly2020that starting ofrevenue for the mechanismasaninstrumentBCA to prevent incontrast leakage, carbon to ourappraisal, butalsoannounced inthe Following theinitiative oftheFrench governments, andGerman theEuropean Council hasnotonlyemphasised a members ofthis ‘carbon club’. were to grow, to) from other obviating (andexported beingimported theneed to onproducts imposea BCA competitivenessprotection andpreserving would belessprevalent iftheinternational alliance for pricing carbon Thus, goods. to itshouldberestricted applyingonlyto imported This fundamental dilemmabetween climate industry. shouldthereforeobjective bereducing emissions, globalcarbon notincreasing thecompetitiveness ofEuropean notasatrade,the BCA competition policy, orindustrial butasanenvironmental policy. proclaimed ultimate Its To theEU’s preserve responsibility for theglobalclimate, oftaking to self-conception present itwillbenecessary consumed inEurope. actually emissionscausedbycurb ofgoodsandservices theproduction controland forfeit over emissionsgenerated theextent ofcarbon intheregion, would since pricing EUcarbon only This isnottheroute to take:by theEUwould implementing BCA, asymmetric contradict itsown communication are are taxedwhere exempt. imports andexports wheredetermined by theyare thecountry consumed. The system would tax, thenbereminiscent ofavalue-added www.worldcommercereview.com this might alsoendangerconformity withGATT rulesandlead to protracted trade disputes. This would risk beall Furthermore, goodsbutalsooffering charges iftheEUwould onimported rebates notonlybe levying to exporters, as apoliticalchoice, andtherefore contesting it. implemented measures. regulatory willtherefore It bedifficult to prevent tothetax it considering countriessubject EU, inareal-world difficult toestimate application carbonvalueofthewide itisvery theunderlying rangeof While, inducingat inprinciple, leastashadow price ofsimilarmagnitude carbon thiscould asinthe beapolicy the latter approach, itwould have to makeupitsmindonhow to defineanequivalent climate policy. all countries outsidetheregulated area, orjustcountries withno ‘equivalent’ theEUopted to If take climate policy? A related issueconcerns thequestionofpossibleexceptions. to – theBCA countries willbesubject Which exporting since process. theproduction thoseonlymeasure emissionscausedduring carbon thedirect employedSimply applyingthebenchmarks for thecost-free isprecluded, emission certificates allocation ofEU-ETS This iscostly, since for thesamegoodthere are many intensities. carbon processes possibleproduction withvarying to capture emissionscausedthroughout allofthecarbon thegood’s entire value chain. content thecarbon measuring ofindividualgoodsisfarfrom easy(Droege andFischer 2020),since onewould have number oftechnical, regulatory, andlegalchallengeswould have to beovercome etal.2019).Accurately (Mehling isreminiscent taxes,While ideaofaBCA theprincipal concept ofthewell-established ofvalue-added asizeable the burden. producers; taxes, dueto ahighpass-through ofimport itisEuropean consumers of whowould bearthemajority www.worldcommercereview.com and CEPRResearch Fellow; ClemensFuest isPresident, ifoInstitute, Professor ofEconomics andPublic Finance atthe Nicola Fuchs-Schündelnof Germany; isProfessor Frankfurt forMacroeconomics University Goethe andDevelopment, of Macroeconomics andFinance, ofEconomy Council, oftheAdvisory andMember Berlin, Humboldt-University Ministry isPresident,Christoph Schmidt EssenandCEPRResearch RWI Fellow; Marcel Fratzscher isPresident, Professor DIW Berlin, AUTHORS ABOUT THE willincrease grows. asthenumberofcountries carbon pricing courtship ■ specifically,Most could beinvited trade mechanism. partners to jointheEU-ETS The chances ofasuccessful US andChinainparticular, to joinafar-reaching international alliance for (Nordhaus pricing carbon 2015). mechanismwithinitsjurisdiction. pricing carbon This credibility iskeyto provide incentives to othercountries, the However, having theEUshouldconsider mechanismonlyafter establishedaclearandcredible aBCA uniform unilaterally,BCA especiallytheUS. were withothertrading partners, inajoint effort to takethisaction The chances ofavoiding asevere traderise substantially conflict would likely iftheEU, instead ofintroducing the Commission (2020b). it could be possibleto implement mechanismthat aBCA iscompatible withtheexisting bodyoflaw (European might interpret any unilaterally introduced asaprotectionist measure BCA anyway (GCEE 2020).Nevertheless, ofthesophistication withwhichanyIrrespective legalobstaclemight becircumnavigated, EUtrading partners instead of for globalclimate protection (Droege etal.2018) the more grave themore economic openlytheEUviews schemeasadevicecompetitiveness, theBCA to ascertain 4 . www.worldcommercereview.com aus dem Moore, N, P Großkurth andMThemann (2019), “Multinationalaus demMoore, Corporations N,PGroßkurth andtheEUEmissions Trading paper.position Academies andtheHumanities(2020),“Energy ofSciences Transition 2030–Key to Climate Protection inEurope”, Ad-hoc acatech Academy –German ofTechnical Sciences, NationalAcademy Leopoldina, ofSciences andUnionoftheGerman References and onglobalproduction effects consumptionpatterns. on itsdifficult-to-assess 4. Jakob etal. (2014)argue, however, asitdepends mechanism isitselfrather ofaBCA thattheclimate impact uncertain, 3. See, forexample, Bureau, theproposals by Dominique Fanny (2019). inCAE HenrietandKathelineSchubert would have to estimated be by employing anintegrated assessment model. 2. Ashadow price associated to acollective constraint isdefined asthepriceto satisfythe signalnecessary constraint.It 1. This dueto acceptability maybe social issuesinEurope, asshown by Oswald andNowakowski (2020). Endnotes CEPR the Graduate Institute ofGeneva, Fellow Distinguished atINSEADEmerging Markets Institute, Singapore, andPresident of ChairattheParisAssociate ofEconomics; andBeatrice School Weder diMauro isProfessor ofInternational Economics at isProfessorConjonctures ofEconomics Economiques; Paris atUniversity KathelineSchubert 1Panthéon-Sorbonne, and École Polytechnique; Xavier Ragot atCNRS,Professor, isDirector Po, Sciences andPresident, Observatoire Français des Economic Analysis, CEPRVice President andResearch Fellow; Professor MejeanisAssociate Isabelle ofEconomics at Toulouse isProfessor ofEconomics; ofEconomics Philippe School Martin Po atSciences andChairFrench Council of ofMunich,Director,University CES,Executive atCESifo, Director andSpeaker, EconPol Europe; isDirector, ChristianGollier www.worldcommercereview.com 105(4): 1339–1370. Nordhaus, W(2015),“Climate clubs:Overcoming ininternational free-riding climate policy”, American Economic Review of Resource Economics 6:297–318. Jakob, M,JCSteckel, andOEdenhofer (2014),“Consumption- Versus Production-Based EmissionPolicies”, Annual Review Gollier, C(2021),“Efficient pricingunderuncertainty” carbon Overcoming theCoronavirus crisistogether, strengthening resilience Wiesbaden. andgrowth, Annual Report, (2020),“Climate opportunity”, CouncilGCEE –German protection ofEconomic asanindustrialpolicy Experts Chapter 4in Wiesbaden. outforanewclimate policy, (2019),Setting CouncilGCEE –German ofEconomic Report, Special Experts pricingofcarbonGreen Deal: in andattheborder ofEurope, andParis. Berlin FGCEE oftheEuropean –Franco-German (2021),Franco-German Council cooperation ofEconomic insupport Experts Policies,GD External PE603.502,Brussels. European Commission (2020b),“Trade-Related ofaCarbon Border Adjustment Aspects Mechanism:ALegal Assessment”, COM(2020) 299final, Brussels. European Commission (2020a),“Powering aclimate-neutral EUstrategy economy: An forenergy system integration”, European GreenEuropean Deal”, Commission (2019),“The COM (2019)640final, Brussels. Droege, SandCFischer (2020),“Pricing carbon Key questionsfortheEU”, attheborder: 18(1):30–34. ifoDICEReport fortheEuropeanOptions Union”, SWPResearch Paper undPolitik. Wissenschaft 2018/RP01,Stiftung Droege, andMMehling(2018),“Mobilising KDas, undertheParis trade forclimate S,HVAsselt, action policy agreement: for Europe”, Ad-hoc paper. position andGCEE–ConseilCAE d’Analyse Économique (2019),“A Council andGerman ofEconomic Experts uniformcarbon price Council ofEconomic Analysis. Bureau, (2019),“A D, FHenrietandKSchubert Proposal fortheClimate: Taxing Carbon notPeople”, Note No. 50,French Management 94:1-26. System: Erosion The ofAsset andCreeping Spectre Deindustrialization”, ofEnvironmental Journal Economics & , VoxEU.org, 6April. www.worldcommercereview.com article was firstpublishedonVoxEU.orgarticle Authors’ note: by This isacondensed theFranco-German(2021).This version Council of Economic ofareport Experts theEuropean (2020),“Making really Green work” Schlögl, R and CSchmidt Deal Oswald, AandNowakowski (2020),“Climate changecomplacency inEurope” , VoxEU.org, 28September. , VoxEU, 23November. www.worldcommercereview.com carbon-intensive hydrogen hydrogen withlow-carbon Ben McWilliamsBen andGeorg Zachmannargue that policymakers mustaddress theneedto displacepolicymakers Navigating through to meetthe2050emissions target hydrogen www.worldcommercereview.com H hydrogen-based solutions intheareas for whichhydrogen is mostsuitable. and continued strengthening ofclimate policiessuchastheEUemissionstrading system to stimulate thegrowth of acceleratingproduction; to test andenablelearning; theeconomic initialdeployment viability withpublicsupport canbefollowed key principles Certain withoutregret: down hydrogen driving supplycosts oflow-carbon withhard-to-reduce sectors decarbonise emissions. carbon-intensive hydrogen hydrogen, withlow-carbon andincentivise theuptakeofhydrogen asameansto technological andsystems innovation, andconsumer preferences. Policymakers mustaddress theneedto displace Whether usewillincrease depends onthecomplex interplay between competing energy supplies, publicpolicy, that are likelyto adopthydrogen. The use ofhydrogen inmany hasbeendemonstrated. sectors A baselevel that at of2050demandcanbederived already sectors from consume looking hydrogen andothers times today’s scenario. level inahigh-demand Hydrogen isusedaseitherachemicalfeedstock oranenergy source. Estimates offinal hydrogen demandin2050 range from levels similar to today’s scenario, inalow-demand to ten unlimited volumes andproduction willthusdependonlyondemandandsupplycost. capture,gas withcarbon, andstorage. The theoretical hydrogen potential production oflow-carbon isvirtually from ifproduced renewabledecarbonised viaelectrolysis sources, basedonelectricity orproduced from natural However, ofhydrogen production intheEUiscurrently emissionsintensive. Hydrogen supply could be net-zero greenhouse gasemissionstarget. Hydrogen islikelytoshortages. play at leastsomerole inthe European Union’s achievement by 2050ofa reduce, asamediumfor energy storage, leadto andasafallbackincasehalted energy fossil-fuel imports ydrogen withgreenhouse isseenasameansto sectors decarbonise gasemissionsthat are hard to www.worldcommercereview.com recently 2000s, astheearly awave ofpublicinterest focused onitspotential for powering automobiles (Lizza,2003). toHydrogen provide ability isnot a newfuel. usefulenergy Its hasbeenunderstood for well over 100years. As consumption andtheassociated emissions. carbon in afuelcell to produce where electricity. sectors itcould beapplied, In hydrogen could displace fossil-fuel The attractiveness ofhydrogen comes that dioxide from nocarbon thefact isemitted orused whenitisburned lead to energy shortages. emissions that are hard to reduce, asameansofenergy storage, andasafallbackincasehalted fossil-fuel imports theEuropeanIn Union’s decarbonisation drive, hydrogen isseenasasolution for withgreenhouse sectors gas 1 Introduction in clean hydrogen clean in designing a framework for the international trade trade international the for framework a designing European policymakers should think about about think should policymakers European www.worldcommercereview.com demand –butitmay meetonly3percent (Figure 1). This isinlinewithmore sophisticated modellingstudies. we oftheseuncertainties, Because estimate that in2050,hydrogen could meet20percent ofEUfinalenergy consumer preferences, decisions, andtherelative policy ofcompeting cleanenergy sources. performance technologies reachnecessary commercial maturity. This willbedriven by thecomplex interplay ofcapital costs, The future role hydrogen willplay where inthesectors itcould bedeployed dependsupontheextentto whichthe from renewables iscreatingof electricity excitement hydrogen aboutlow-cost, low-carbon production. highly carbon-intensive. Buthydrogen canalsobeproduced viaelectrolysis. from electricity The rapidly fallingcost Furthermore, thedominant route production for hydrogen –involving separation ofhydrogen from methane–is exclusively asachemicalfeedstock for ofammoniaandmethanolfor the production crudeoilrefining. Union isthusfarremoved from therole optimistsseeitplaying inanet-zero iscurrently usedalmost EUin2050.It thistechnical promise,Notwithstanding hydrogen remains prohibitively expensive. usetoday intheEuropean Its the seasonalstorage generation issuethat peaksinsummer, whilerenewable electricity demandpeaksinwinter. the argument that theEU’s cleanenergy potential might betoo limited. Moreover, hydrogen offers onesolution to On thesupplyside, hydrogen thepotential oflow-carbon for large isattractive imports whenconsidered against valuable argument that fulldecarbonisation istechnically feasible. On thedemandside, hydrogen hard-to-abate could sectors, beasolutionfor suchassteel, particularly providing a Interest inhydrogen isnow resurging intheEU, linkedto thebloc’s muchmore ambitiousdecarbonisationtargets. www.worldcommercereview.com Source: Bruegel. at3percent. lower estimate (295 TWh) would seetotal hydrogenprovides demandofapproximately asensibleorder ofmagnitude. higher estimate 20percent (2,080TWh) Our offinalenergy demandin2050,withthe Some oftheusesfor hydrogen TWh figureTWh. still shown in thefigure are asachemical notenergy feedstock, final energy demandin2050of10,000 consumption, butthe10,000 Note: Horizontal barsrepresent therange ofannual hydrogen our highestandlowest demandbetween 3).The European assumptions(seesection Commission (2018)estimated total Figure 1.Estimated variation inhydrogen demandin2050 Light commercial vehicles Heavy-duty vehicles Heavy-duty Passenger vehicles Residential heat Steelmaking Oil re ning Ammonia Methanol Shipping Aviation 0 100 Residential 200 Annual demand(TWh) 300 Transport 400 500 Industry 600 700 www.worldcommercereview.com these inputs. Production methodsdiffer emissions. significantly intheir associated greenhouse-gas waste, solarradiation, coal and oil. At least16different methodsgenerate production hydrogen from at leastoneof ofhydrogen production differentLarge-scale canbedoneusingsixvery inputs:natural gas, electricity, biomass/ 2 Hydrogen supply should therefore focus onstimulating cost for reductions ofcleanhydrogen. theproduction meanthat atsector leastsomecleanhydrogen willberequired by 2050.Public policy, whichwe cover 4, insection Despite theuncertainty, hydrogen’s current useasachemicalfeedstock andhighlylikelyadoptioninthesteel distances. Orhydrogen niche, might finda temporary for example inheating ofbuildings. sectors, suchasaviation, ormight cover suchashydrogen sub-sectors, fuelcells for vehicles heavy travelling long where knowing the todayThe exactly difficulty liesin forpolicymakers hydrogen It nichelies. could cover whole 2050 hydrogen demandmight 3). beinten significant (section sectors pathway for future decarbonisation. To around illustrate future hydrogen theuncertainty demandwe assesswhat We inwhichhydrogen thenexamine themainsectors iscurrently being consumed orisconsidered animportant of cleanhydrogen 2). (section energy source EUin2050. inadecarbonised The firstfundamental stepto produce istheability significant volumes We first explore thepotential for hydrogen to evolve from today’s highlypollutingchemical feedstock to akeyclean iseithertoo expensivewhere orcomplex. electricity decarbonisation willbedriven while mainlyby electrification, hydrogen willemerge to filltheniche forapplications This Policy Contribution examines thegapbetween 3percent and20percent. theideathat analysis Our supports www.worldcommercereview.com CCS inhydrogen andmediumterms, butnotasalong-term priority. intheshort production Hydrogen intheEUiscurrently supply capacity estimated at 339terawatt hoursperyear prices. installations, in transforming theirtechnological inputfuels efficiency into hydrogen, theinputfuelandcarbon The cost-competitiveness ofdifferent hydrogen processes production dependonthecapital costs ofthe required Figure pathways 2provides production ofthelow-carbon aschematic overview for hydrogen. fromfrom lignite orhighlypolluting(eg. renewable power electricity ornuclear-generated electricity) plants). determines whetherthehydrogenatoms), theorigin oftheinputelectricity iscarbon-neutral (eg. whenproduced For example, isusedto splitwater for moleculesinto viaelectrolysis production (electricity hydrogen andoxygen from methane, upto capturing 90percent oftheCO An alternative optionwould beto capture applycarbon storage (CCS) technology ofhydrogen intheproduction input. electrolysis withrenewable production electricity into aviablesolutionto decarbonise different sectors” (European iscentred Commission, 2020).It onscalingup The EUhydrogen strategy, publishedinJuly2020,aimsto setoutavisionfor “how theEUcan turncleanhydrogen electrolysis, intensity ofelectricity. whichdependonthecarbon a process that generates significant dioxide carbon emissions.Box 1 compares theseemissions to thosefrom Production offossil hydrogen inEurope ismainlydoneby separation ofhydrogen from astream ofmethane, than 5percent isproduced viaelectrolysis (Cihlar etal2020). of EUfinalenergy demand(FCHJU,Of this, 2019). over 95percent is hydrogen produced from fossil fuels, andless 2 emissionsgenerated 2 (IEA,2019a). The strategy seesarole for 1 , approximately 3percent www.worldcommercereview.com emissions intensity of European electricity isreducedemissions intensity ofEuropean to significantly electricity below 200g CO Therefore, hydrogen electrolytic willonlyresult thanSMRwhentheaverage inbetter emissionsperformance For hydrogen from methanewithoutCCS, isaround intensity ofproduction thecarbon 270gCO Box 1.Carbon emissionsassociated withhydrogen from methaneandelectrolysis current average emissionsof285gCO electricity-related electrolyser connected to the European electricity grid,electrolyser to connected theEuropean average electricity emissionswill be430gCO tightened enoughto meettheEUclimate targets. emissions trading system (which covers hydrogen andnatural gas)shouldbe from production electricity To ensure that domestichydrogen doesnotresult production inincreasing emissions, thecapofEU only implythat otherconsumers would consume non-green electricity. production ‘low-carbon’ by producing itfrom hasnoeconomic justification green becauseit would electricity windy summerweekends, EUcountries, hydrogen suchasFrance orincertain But making andDenmark. Very low intensities carbon canalready today beachieved inmany hoursoftheyear, suchasonsunny and decarbonised. become even isfurther cleanerover timeaselectricity of current decarbonisation trends would seethishappeningaround 2025.Production from electrolysis will 2 / kWh. 2 /kWh. Extrapolation 2 /kWh, basedon 2 /kWh. For an www.worldcommercereview.com Source: BruegelbasedonHanleyetal(2017),Nikolaidis andPoullikkas (2017),Piebalgs etal(2020)andIEA(2020). Notes: SMR=steam methanereforming. CCS =carbon capture andstorage. electrolyte PEM =polymer membrane. ATR= autothermal reforming. Figure 2.Low-carbon hydrogen production Production methods resource Energy ATR withCSS Natrual gas SMR with CSS Thermal cracking Kvaerner process Concentrated thermolysis methane Water solar electrolysis electrolysis electrolysis Solid oxideSolid Electricity Scienti c researchScienti c Alkaline Alkaline PEM Photoelectro electrolysis chemical splitting Commercial adoption Thermal water water Solar Hydrogen Prototype/demonstration Waste gasi cation with CCS Waste Biomass gasi cation Biomass pyrolysis (In)direct bio (In)direct photolysis (with CCS) Biomas byproduct Industrial Industrial www.worldcommercereview.com will therefore between regions. vary wholesale prices drive significant price differences. regional electricity The versusgas competitiveness ofelectricity Moreover, ouranalysis isbasedon average EUvalues andcost assumptions. Differing tax rates, network costs and areelectrolyser capacity setto stimulate cost reductions. Commitments inhydrogen strategies publishedsofarby theEU, itsmemberstates andothercountries to deploy 2030 and2040,dependingontheregion, cost dynamics. becauseofshifting forecast electrolysis-produced hydrogen becoming hydrogen cost-competitive withmethane-produced between would becompetitive prices donotdrop to even €25/MWh. ifelectricity Wood (2020),for Mackenzie example, Furthermore, thecapitalcosts ofelectrolysers could fallsignificantly inthenear meaningthatterm, electrolysis current prices would become competitive withnatural gas. price would alsoaffect the cost. An increase price inthecarbon at to €200/tonne would meanthat electricity would become cheaperthanthat producedelectricity from methane. Ontheotherhand, increases inthecarbon to about €20/MWh (for example becauseofcost related reductions to renewables), hydrogen produced from without CCS issignificantly cheaperthan hydrogen from production electricity Figure 3shows that at current prices andcarbon natural gas, electricity around €40-€50/MWh prices likelyavailable toMWh, producers shadedgrey industrial whiletherange ofelectricity isthevertical area, price (Figure andthecarbon (natural gasorelectricity) estimates 3).Our for useaprice of€20/ methaneproduction The competitiveness ofhydrogen from methanecompared to electrolysis dependsontheprice oftheinputs 3 . 4 , hydrogen from production methane 5 . However, prices drop ifelectricity www.worldcommercereview.com Source: BruegelbasedonIEA. CAPEX -$910/kWH CAPEX methane plantwithoutCCS. Calculations basedonIEAassumptions:forelectrolysis, -$900/kWe, CAPEX Annual –64%, CAPEX. OPEX–1.5%of efficiency Fornatural gas reforming, generators.by electricity For natural we gasproduction, assume agasprice The dashedlinesrepresent of€30/MWh. different hydrogen costs fordifferent prices carbon paidfora Note: thegraph shows thedifferent hydrogen prices prices usinganelectrolyser, fordifferent electricity where the costof isalready carbon internalised through the price carbon paid Figure 3.Hydrogen price forcarbon prices different and electricity Hydrogen cost, €/MWh 100 120 140 20 40 60 80 0 0 2 , Efficiency – 76%, Annual emissions=8.9kgCO –76%, CAPEX, OPEX=4.7%of , Efficiency 10 20 Electricity price, €/MWh Electricity 30 40 Current range price 50 2 /kgH 2 . 60 Electrolysis 70 Future price highcarbon CO CO Gas price: € Gas Gas price: € Gas 2 Current situation price: € 2 price: € 80 0-100/tonne 200/tonne 20/MWh 20/MWh www.worldcommercereview.com In sum,theglobaltechnical potential production In ofhydrogen exceeds demandby several orders ofmagnitude lists them,alongwithsomerough cost estimates. Hydrogen are from production themostcommon methods, natural gasandelectricity butthere are others. Table 1 2.1 Alternative pathways production sources 3.4). of renewable (seesection electricity to thegrid by consuming at excess timesof excess electricity supplyandhelpingto facilitate theover-deployment occasionally prices even for negative) asubstantial numberofhours, electricity andb) providing services flexibility Therefore, electrolysis could emerge asasignificantly more a)utilisingclose competitiveto zerotechnology (or by: increase demand for electrolysis asasource offlexible power demand. prices (becauseofincreasing shares ofrenewableincreasing ofelectricity variability energy generation) could However, developments inalternative electrolysis technology withlimited flexibility,demanding electricity whichisthesituation withelectrolysers today. And we baseouranalysis onanelectrolysis plant behaving asatraditional baseloadconsumer ofelectricity, ie. The EUhydrogen strategy works of13percent withaprojection to 14percent by 2050(European Commission, optimisticscenarios,In hydrogen could contribute asignificant share offinalenergy demandwithintheEU by2050. 2.2 Hydrogen imports capital, theavailability ofrequired hydrogen infrastructure for transport, storage storage andpossiblycarbon space. level. National hydrogen costs production candiffer dependingonthediffering and costofinputsand availability onlyonthehydrogenmeaning expansion ofsupplydependsinprinciple cost production anddemandat that cost 6 , thefallingcapitalcost ofelectrolysers andthe 7 , www.worldcommercereview.com Table 1.Additional hydrogen low-carbon methods production Source: Kayfecietal(2019). Note: CCS =carbon capture and storage. cracking ofwater)cracking thermolysis (thermal Solar (thermal cracking ofwater) cracking (thermal Nuclear thermolysis electrolysis) PEC process (photo- electrolysis thermal Solar Photo-fermentation fermentationDark bio-photolysis Indirect bio-photolysis Direct Biomass gasification Biomass pyrolysis cracking pyrolysis/thermalMethane with CCS Autothermal reforming Production method Solar Nuclear Solar Solar Solar Solar Solar generatedInternally steam generatedInternally steam generatedInternally steam Fossil fuels Energy source Water Water Water Water Organic biomass Organic biomass Water andalgae Water andalgae Biomass Biomass Natural gas Natural gas Feedstock Hydrogen cost estimate (€/MWh) 269-284 172-354 60 –69 42 -74 54 -57 73-89 350 96 87 48 72 50 www.worldcommercereview.com The future evolution ofdemandfor hydrogen Hydrogen inEurope hashistorically hadalimited ishighly uncertain. 3 Hydrogen demand replacement for ofrenewable localpopulations by fossil electricity fuels. increase orindirectly directly netemissionsintheproducing country, for example through land-usechangeor However, consistent international ruleswould beneededto ensure of thathydrogen significant imports donot competitive. acceptable landisalready utilised, whileinvestment ofhydrogen costs inAfrica decline, imports might become deployment Africa. If ofadditionalwindorsolarunits inGermany becomesfrom difficult becausesuitable/ North Based onIEAassumptionsofcurrent costs itseemshard ofhydrogen to makeacasefor imports from solarenergy by ship.transported hydrogen canbetransformed into, for example, ammonia, whichcanbemore easilystored inliquidform and Furthermore, thecost advantage mustexceed ofhydrogen thecosts ofdelivery asagasviapipelines. Alternatively, costs are notsubstantially higherthanintheEU. economic countries sensewhentherenewables are conditions significantly in theexporting better, whilecapital thehydrogen renewablesInstalling andelectrolysers outsidetheEUandimporting into theEUonlymakes resources, green hydrogen could become anattractive export. theEUaimsfor– thesamecapacity withinitsborders. From countries withanabundance ofrenewable energy Commission hydrogen strategy aimsto develop 40GWofhydrogen regions inneighbourhood capacity by 2030 hydrogen2020). If demandisto reach ofhydrogen suchlevels, imports might alsodevelop. The European www.worldcommercereview.com Source: IEA(2019a). cost of$2/Kg. Africa: transport distance: pipeline 3,000Km, 10%,transport North Africa: $900/kW,Note: Key interest electrolyser: price assumptions:CAPEX $23/MWh, rate inNorth 5%,interest electricity $47/MWh, price inGermany: rate inGermany: electricity in Figure vs domestichydrogen 4.Import (€/MWh) North Africa North Germany 0 20 40 Transport cost cost Electricity Investment cost 60 80 100 120 140 www.worldcommercereview.com building blockfor renewable synthetic fuels(e-fuels). be transformed into ammoniabefore useinafuelcell orby combustion. Finally, hydrogen canalsobeusedasa can beconsumed through directly afuelcell to produce electricity, orcombusted. Alternatively, hydrogen can There are multipleoptionsfor hydrogen consumption intheroad, Pure rail, andairtransport. maritime hydrogen 3.1 Transport provides anoverview. (3.2) andresidential heating (3.3). We alsodiscusstherole hydrogen may play inthepower (3.4). sector Table 2 assessmentOur ofhydrogen applications 3.1),industrial demandfocuses (section onthree broad transport sectors: energy withincomplex carriers energy systems (Hanleyetal 2017). therefore cannotbeconsidered inisolation butrather incombination with thedevelopment ofothers fuelsand capture, andcarbon electrification willbesignificant fordetermining the roleorniche for hydrogen. Hydrogen The evolution decarbonisation options, ofcompeting includingenergy orcomplementary efficiency, biomass, serve to highlight the significant uncertainty surrounding to future highlight thesignificant serve uncertainty hydrogen demand opposite occurs,which theexact andoneinthemiddle. numbersare Our notintended to beforecasts, butrather hydrogen technology anddeployment isaggressively andcosts continue pursuedby to policymakers fall, one in We thusprovide abroad ofwhat hydrogen overview demandmight looklikeinthree scenarios: oneinwhich scenarios. formost likelysectors future hydrogen demand, withcalculations for high,mediumandlow hydrogen demand role we ininfluential globalenergy discussthe thissection, modellingstudies (for etal2020).In example,Quarton 8 . www.worldcommercereview.com Source: Bruegel. Note: *emissionsincludeallchemical sector, notonlyammoniaandmethanol. Table scorecard 2.Sector Sector Ammonia &methanol Residential heating Aviation Shipping vehicles duty Heavy vehicles Light commercial Passenger vehicles Steelmaking Oil refining (% ofEUtotal) Emissions 14%* 12% 12% 4% 7% 5% 2% 4% 2%     Hydrogen potential      Note Competing withelectricity Synthetic fuels;fuelcells ammonia Potential additionaldemandviauseas Hydrogen more suited to heavier vehicles competitors vehicles likelyto bestrongElectric low market carbon vehicles holdfirst-moverElectric advantage in potentialHigh to replace coal by-product natural gas/industry Already usinghydrogen produced from by-product natural gas/industry Already usinghydrogen produced from www.worldcommercereview.com Source: Bruegel. Figure sector 5.GHGemissionsshare intransport 21.85% Shipping 2.64% Other 11.78% Aviation 0.35% Railways vehicles duty 17.01% Heavy 7.65% Light commercial vehicles 38.72% Passenger vehicles www.worldcommercereview.com the problem that while FCEV take-up islow,the problem take-up that whileFCEV investment inrefuelling is notattractive. networks As othereconomic deployment ofhydrogenLarge-scale refuelling would networks befundamental to this, butthesecurrently stillface As grow markets andprices decrease, itispossiblethat FCEVs willoneday compete more withBEVs. seriously ie. hydrogen passengervehicles. BEVs. Moreover, vehicles (FCEV), Honda)are companies electric developing (Hyundai, stillactively fuel-cell certain technological limitations ofbatteries orexcess from grids arising too many strains managed onelectricity poorly Nonetheless, there may besomescope for hydrogen iflimitations becauseofraw arise material shortages, significantly more funding,for charging government infrastructure. particularly andprivate-sector (IEA, 2019).BEVs now enjoy afirst-mover advantage asthe conventional passenger vehicle. low-carbon They attract As aresult, theglobalstock offuelcell (hydrogen) vehicles isjust11,200 compared to more than5millionBEVs while range percharge isincreasing. vehicles (BEVs).passenger vehicles electric looksto beoneofbattery The price ofbatteries hasrapidly dropped hydrogen roadIn transport, faces competition direct from electricity. Increasingly, future thedecarbonised of Passenger vehicles Transport: road • • • 12 percent ofEUgreenhouse gasemissions Lower demand:0 Upper demand:140 demand:50TWh. Medium TWh TWh. Hydrogen potential:  9 www.worldcommercereview.com limited role. Overhead transmission lines may alsoplay a transport. to dominate electrification heavy-duty allow battery-driven hydrogen). improvementsThe speedofbattery hasbeenrapid sofar, possiblethat innovations anditisstillvery will segment, thismarket hydrogenIn fuels(via would compete againstbiofuelsand theuseofelectrically-derived for whichgreater range andhigherpower outputare required. being overcome for small, passenger vehicles. However, hydrogen fuelcells could bedeployed in heavier vehicles weigh about14tonnes. andrange As oflithiumbatteries thecapacity hasexpanded, thisproblem isgradually For example, truckwould to have provide ofanelectric to thesamerange thebattery asa1,000litre dieseltruck, vehicles hasbeenproducing electric batteries whichcontainof battery sufficient energy but are not tooheavy. store more energy inasmallerspace andat lower weight thanalithium-ionbattery. Achallengefor manufacturers Hydrogen appears to have greater because hydrogen sector road potential transport for isableto theheavy-duty Heavy-duty vehicles Heavy-duty use, suchastaxisandbuses. Hydrogen offers charging, quicker itpotentiallyrefuelling thanbattery more making suited to vehicles in constant more attractive. begin tosectors demandmore hydrogen, ofhydrogen theroll-out refuelling may networks become economically • • • 5.2 percent ofEUgreenhouse gasemissions(includingbuses) Upper demand:200 demand:120 Medium Lower demand:10 TWh. TWh. TWh Hydrogen potential:  10 www.worldcommercereview.com Transport: rail dynamicswouldmarket stillsuggestthat BEVs willdominate thismarket. vehicles). However, inheavy-duty deployment elsewhere (particularly to similarly passengervehicles, current deployment ofhydrogen may fuelcells inthissector likelydependontheinitialsuccess ofhydrogen fuelcell Currently, over 90percent oflight commercial vehicles intheEUare diesels(European Commission, 2018). The will bedominated by BEVs. higher energy density, vehicles, possiblethat butnotcomparable thismarket to meaningitisstillvery heavy-duty vehicles. They tend to beslightly larger thanpassengervehicles, giving hydrogen anadvantage becauseofits Vans andlight commercial vehicles occupy themiddleground between passengervehicles andheavy-duty Light-commercial vehicles hydrogen additionalindirect Some demandmight derived occur fuels. through electrically vehicle stock (European Commission, 2018).Least optimisticscenarios would see0-3percent deployment. FCEV The mostoptimisticEU2050scenarios seeapproximately a15percent share of hydrogen FCEVs goods intheheavy • • • • • • 0.11 percent ofEUgreenhouse gas emissions closeto zero likelytoDemand: bevery Hydrogen potential: 2.3 percent ofEUgreenhouse gasemissions Upper demand:60 15 Medium: Lower: 0 TWh. TWh. TWh Hydrogen potential:   11 www.worldcommercereview.com and ammonia (Middlehurst, 2020),haveand ammonia(Middlehurst, greater potential longerdistance interms ofdecarbonising shipping. ships. Liquefied electric is likelytohydrogen, beincompetition withbattery synthetic fuelsderived from hydrogen Hydrogen fuelcells light may shipping, work for for short-distance whichpower requirements are nottoo large. This Commission isconsidering includingshippingintheEUemissions trading system. and plannedcontrols ongreenhouse anattempt gasemissionsmark to move beyond fueloil. heavy The European mixintheEUandgloballyisdominated by fuel oil. heavy Policy onsulphuremissions The restrictions maritime-fuel Transport: shipping leading candidate for sector large volumes ofhydrogen consumption. fuel cells, driven by deployment trains are elsewhere. anotheroption.Overall, electric rail isnotlikelyto Battery bea (Donat, 2020).electrified Take upof hydrogen tracks canbeaided byfallsinthe costsof for trains onnon-electrified The potential scope isstillrelatively smallasapproximately 50percent ofEuropean tracks have already been On thesetracks, hydrogen fuelcells are anattractive option(IEA,2019). For less-usedtracks, thereturns are notlarge enoughto justifythesignificant upfront capital costs ofelectrification. heavily usedinorder to increase theratio ofreturns to afixed investment. tracks impliessignificant upfrontElectrifying fixed costs. sofar arethose which Tracks electrified arethemost rail tracks, are awayThe inelectrifying strongest shifting from decarbonisation opportunities dieselconsumption. • • • 6.6 percent ofEUgreenhouse gasemissions demand:70 Upper demand:120 Lower Middle demand:20 TWh. TWh. TWh Hydrogen potential:  12 www.worldcommercereview.com combining the two (electricity andhydrogencombining thetwo (electricity combustion) are alsopossible. orfuelcellthrough (hydrogen) battery planes, orthrough electric combustion direct ofhydrogen. options, Hybrid andpure for hydrogen example), electricity is about2,950km, could makeasignificant contribution. This may be kilometres (encompassingFor flights most oflessthan3,000 European Madrid flights; toHelsinki short-distance Transport: aviation multiple end-usecases. example. Port hydrogen storage infrastructure willbecome and distribution economically more efficient with operations. trucksare Forklift uses inport already abigadopter ofhydrogen, with25,000deployed globally, for For thisreason, itisquite likelythat oneortwo fuelswillbecome dominant. Hydrogen might be boosted by other multiple locations, indifferent normally countries. can store hydrogen orhydrogen-derived fuels. Here, aglobalcoordination problem asshipsmustrefuel arises in A challengewillbeto transform bunkering, orfuelling, facilities, whichcurrently store fueloils, heavy sothey sector.the maritime engine, through orby afuelcell. producing electricity Biofuelsare likelyto beanothercompetitor for hydrogen in Like hydrogen, ammoniacanbeusedto produce energy eitherby combustion withinaninternal combustion • • • 3.60 percent ofEUgreenhouse gasemissions demand:180 Upper demand:340 Lower Middle demand:0 TWh. TWh. TWh Hydrogen potential:  13 www.worldcommercereview.com alternatives isclarified. development. willtakemany years It ofresearch anddevelopment before thepotential ofhydrogen relative to However, box, aviation with remains immaturetechnologies inthehard-to-decarbonise firmly stageof at a very hydrogenindirect usefor producing synthetic fuels. combusted flight. during We estimate anupperboundof210TWh ofdirect hydrogen usein aviation, and130TWh a fuelcell/combustion flights, to producing power orindirectly synthetic jetfuelswhichare short-distance then Therefore, there are two separate considerations for future hydrogen demandinaviation: through directly usein demanded by other economic sectors. a stimulusfor investment into hydrogen. willbethe extent to whichbiofuelsare influencingfactor Afurther Longer distance flights require fuelswithhigherenergy densities. Advanced biofuelsandsynthetic fuels through fuelcells.producing electricity (Airbus, 2020). The proposed planesare ofahybrid nature, combusting hydrogen and inmodifiedgas-turbines hasreleasedAirbus three concept designs for hydrogen planeswhichtheystate by could 2035 enter service Biofuel production isconstrainedBiofuel production by landavailability For longerdistance flights, theevolution of biofuelswillbeakeydeterminant for thepotential of hydrogen fuels. option. and cost would be reductions required support Significant policy for synthetic fuels to bea realistic decarbonisation Synthetic replacement jetfuelcanbeadrop-in for current jetfuel. However, optionsare today fartoo expensive from hydrogen are themost promising decarbonisation options. 16 andany constraints will provide onbiofuelproduction 14 derived 15 . www.worldcommercereview.com 2017). Other usesare for2017). Other acid, nitric pharmaceuticals andcleaningproducts. 80percentOver ofammoniaproduced worldwide (BazzanellaandAusfelder, isfor offertilisers themanufacture Chemical sector: ammoniaandmethanol Chemical sector: Ammonia production source isfossil-fuel derived hydrogen. The bothrequire ammonia andmethanolsectors hydrogen asafeedstock. The mostconvenient andcost-effective for upto 41percent oftheEU’s emissions industrial isoneofthemostcommonlyproduction discussedfuture usesfor hydrogen. These four together account sectors (Cihlarmethanol production etal2020). ofsubstitutinghydrogenThe possibility for fossil fuelsusedinsteel Currently, over 90percent ofhydrogen produced in Europe isusedasafeedstock inoilrefining, ammoniaand 3.2 Industry conventional onburning some extent carry fossil fuelsandemittinggreenhouse gases. net-zero 2050scenario that involves significant useofnegative emissions technologies. Aviation may therefore to Moreover, asoneofthehardest to decarbonise, sectors aviation isastrong contender for residual emissionsina • • • • 2015 demand:129TWh Upper demand:240 160 Medium: Lower: 100 TWh. TWh. TWh 3.2 percent ofEUgreenhouse gasemissions Hydrogen potential:  18 17 . 19 www.worldcommercereview.com Source: Bruegel. Figure 6.EUindustrialgreenhouse gasemissions 59% Other 16% Steel 14% Chemicals 11% Oilre ning www.worldcommercereview.com methane to reduce directly emissionsfrom by ammoniaproduction eliminating theneedfor ofhydrogen production from chemicals production. The rulesto EUin2019updated promote fertiliser basedonorganic materials fertilisers rather than However, may drive outammoniainfavour publicpolicy orhigherlevels ofbiological oforganic fertilisers become more efficient to feedanincreasing numberofmouths from thesameamount ofland. As theglobal population increases, demandfor willincrease; food ammonia-basedfertilisers must production Europe currently produces 17milliontonnes ofammoniaannuallyandthefuture evolution ofdemandisuncertain. being combined withnitrogen from theairto produce ammonia,orNH Europe,In feedstock. from Hydrogen natural natural isextracted gasisthemostimportant gas(methane)before Methanol production Methanol power sector Moreover, non-traditional demandsfor 3.1)andpotentially ammoniamay even inshipping(section arise inthe energy fromcould areas helpintransporting ofrenewable energy abundance to areas ofdemand. contained inahydrogen atom (ammonia’s thanhydrogen). physical makeiteasierto transport properties Ammonia becomes asignificant future energy carrier. Ammonia could beapreferable theenergy option for transporting analysisOur isbasedontraditional usesofammonia,butammoniademandcould significantly rise ifammonia • • Upper demand: 30TWh. Medium demand: 25TWh. Lower demand:15TWh demand:25TWh. Medium Upper demand:30TWh. Hydrogen potential: 20 22 . Suchgreen are ammoniaprojects already underway . 23 . Suchascenario would significantly increase hydrogen demand for ammonia production.  21 . 3 . Green hydrogen would therefore beable 24 www.worldcommercereview.com hydrogen demand perbarrel ofcrude oil in Europe issetto decrease. Meanwhile, are sulphurrestrictions progressively beingtightened, increasing the Future demandfor hydrogen will bedetermined by inthissector future demand for crudeoilproducts, which oils into lighter andmore commercially attractive fuels. from becausesulphurisanairpollutant. isusedto Hydrocracking crudeoil, transform necessary heavier residual Hydrogen isused inhydrotreating andhydrocracking. Hydrotreating refers to theremoval ofsulphurimpurities A majoruseofhydrogen today isinoilrefining: crudeoilinto turning commercially attractive end-useproducts. Oil refining withintheEU.ammonia sector Assuming similartrends, finaldemand for hydrogen islikely to besignificantly inthis sector lower thaninthe Currently, (1.5Mt/annum)asashare EUmethanolproduction ismuchlower ofglobalproduction thanfor ammonia. significant emissions. carbon methane. The ofgreen production hydrogen would reduce demandfor hydrogen from natural gasandits toSimilarly ammonia,demandfor hydrogen ispredominantly inmethanolproduction metby hydrogen from • • • • • 2.4 percent ofEUgreenhouse gasemissions 2015 demand:153 TWh Lower demand:50TWh demand:90TWh. Medium Upper demand:110TWh. Hydrogen potential: 2015 demand:27 TWh  26 . 25 www.worldcommercereview.com significant emissionsassociated withBOF. However, capture unlesscarbon canbedoneat levels ofemissionsfarabove capabilitiestoday, there willalways be capturecarbon technology. made to reduce emissionsby improving efficiency, replacingsome coalwith hydrogen and retrofitting plants with The BOFroute produces steel usingcoal andhaslittlefuture world, inadecarbonised are being thoughefforts arcCommission, furnaces (EAF). 2018) andelectric processing into steel. Steel canbeproduced inblastoxygen furnaces (BOF)(60percent European ofEUproduction; greenhouse steelmaking gasemissionsareMost associated iron withtheturning ore into iron to prior its associated andhydrogen withthesteel sector iswidelyregarded asfundamental to thesector. decarbonising The EUproduces 177milliontonnes ofsteel ayear, 11percent ofglobaloutput Steelmaking products. there willlikely stillbedemandintheoilrefining becauseoftheuse sector chemical hydrocarbons in certain greenhouse emissionsbecauseofthecurrent intensity ofhydrogen carbon (Catalá etal2013,Figure 2050, 4.5.5).In Ironically, suchasjetfuelhave oncrudeoilproducts sulphurrestrictions inrecent years likelyincreased thesector’s • • • 3.8 percent ofEUgreenhouse gasemissions Lower range: range: 150TWh. 100TWh Middle Upper range: 240TWh. Hydrogen potential:  27 28 . Significant emissionsare www.worldcommercereview.com capacity, with suchfacilitieslikelyto become stranded assets by 2050. using hydrogen is not yet economically mature. However, BOF inany further oflocking mustbewary theindustry One issueisthelonglifespan ofsteel plants –approximately 35years. The ofsteel production through DRI-EAF iron resources to closeto cheapgreen-energy resources. A related questioniswhetherthemove to DRI-EAFwillaffect thelocation ofsteel from production close to coal/ option for withintheEU(Hoffmannetal2020). thesector steel andDRIproduced usinghydrogen arc furnaces isconsidered inelectric themostviabledecarbonisation target isto usepure hydrogen rather thanahydrogen/carbon for mixture ofiron reduction ore. Using bothscrap All major European steelmakers are currently buildingortesting hydrogen-based for reduction useinEAF gasesforand carbon reduction. hasaccess to Eastwhere natural low-cost industry gas,Middle whichisusedfor producing thestream ofhydrogen hydrogen monoxide. andcarbon This isalready atechnologically proven route, inthe withdeployment particularly Meanwhile, producing DRIfor useinEAFinvolves iron reacting ore withareducing agent, currently of amixture a welcome toward shift thecircular economy Globally, scrap steel contributes to about25percent ofsteel Increasingtheuseofscrap production. steel would be combination. decarbonised. Two different feedstocks canbeusedwithEAF: scrap steel anddirect reduced iron (DRI),ora production). Here, the primary energy Here, inputiselectricity production). theprimary ofsteel thereforeDecarbonisation production relies onswitching to theEAF(currently 40percent ofEU 30 , but is limited by availability of high-quality scrap , butislimited by availability ofhigh-quality 29 , making green steel possible if the electricity is green steel, making possibleiftheelectricity 31 . 32 . The www.worldcommercereview.com issue reduced through better insulation. The EU’s 2020Renovation Wave strategy isintended to addressthis exactly zeronew buildingsmustbenearly energy consumption. Old buildingsmustberenovated, andheating demand 2021, newbuildingsmustcomply withrequirements intheEnergy Performance ofBuildingsDirective 2010/31/EU: willbeachieved reductions Demand through acombination ofrulesfor newbuildandexisting households. From sees energy demandfor residential heat halvinginabaselinescenario (European Commission, 2018,Figure 39). isthemain toolEnergy decarbonisation ofthebuildingssector. efficiency forensuring The EU’s long-term roadmap 2020). percent ofdemand. Coal, oil, andbiomass are theothersignificant and contributors (Bertelsen Mathiesen, Vad fuelusedforNatural gasiscurrently householdheating intheEU, themostcommon primary accounting for 44 Residential heating (European Commission, 2018,Figure 43). European Commission scenarios forecast agrowth inthisshare to between 22percent and44percent by 2050 energy. Currently, infinal residential heating theshare demandisapproximately ofelectricity 5percent but percent, are ableto draw three timesmore heat energy from outsideairthantheyconsume interms ofelectric powered heatingDomestic canalsobecome more Electrically electrified. of300 heat pumps, withanefficiency • • • 34 12.5 percent ofEUgreenhouse gasemissions Upper demand:600 demand:300 Medium Lower demand:0 TWh. TWh. TWh Hydrogen potential: .  33 www.worldcommercereview.com A finaloptioninvolves keeping thenatural muchasitis biomethane gasnetwork today butinjecting heating onthecoldest days to prevent excessive grids. distribution strain onlocalelectricity role.still play acomplementary Decentralised provision ofhydrogen (ie. gasbottles)could supplement residential residential heating technology, ispursuedastheprimary Under ascenario inwhichelectrification hydrogen may grids would distribution alsohavestrengthening ofelectricity to befinanced. consider this in light of the difficulties faced with smart meter roll-outs across meterconsider thisinlight Europe roll-outs ofthedifficultiesfaced withsmart But itwillbemore substantial difficult topushindividualusersinvestments tomakethenecessary –onemight bemoreprinciple efficient andallow for gradual switching ofusers attheir convenience. investments ontheusersideto residential decarbonise heating, heat whilemovingpumpswillin to electric Switching grid to agasdistribution hydrogen andwould would require beorganised top-down lesssignificant withahighhydrogengas (amixture concentration) to natural gas. were grids intheUnitedThis Kingdom isnotanimpossibletask; retrofitted inthe1960s to move away from town To achieve concentrations ofhydrogen ingasgrids above 20percent, pipesandgrid appliances mustberetrofitted. creating for demand market anearly green hydrogen. run,theblendingofhydrogen theshort intoIn gasgrids allows for incremental inemissionswhile reductions Technically, (roughly 5percent proportion thiscanbedoneupto to acertain 20percent). solution,blendingnaturalNonetheless, gaswithhydrogen asatemporary ingasgrids isbeingdiscussed. methane produced by combining hydrogen dioxide. withcarbon 35 . Moreover, therequired 36 orsynthetic www.worldcommercereview.com regulatory developments fewregulatory inthenext years. Whether electrolysers canbecompetitive asproviders willdepend ontechnological and ofgrid-balancing services controlGerman market. reserve showed that already Germany in2016,a6MWelectrolyser was inMainz, deployed witheconomic benefit to the and reduced Koppetal (2017) market. allowing whensupplyisweak, more efficient balancingofthe electricity Hydrogen viaelectrolysis production could be increased timesofexcessive during renewable power generation flexible demand Short-term hydrogen produced from electrolysis. A numberofoptions, beyond thescope ofthisPolicy Contribution, are underconsideration, includingtheuseof that isproducedis to maximisetheuptakeofrenewable whenthesunisshiningandwindblowing. electricity sourcesIncreased adoptionofvariable renewable ischanging thismodel. electricity Achallengefor grid operators example gasorhard coal), withrelatively littlestorage. a mixofinflexible baseload(nuclear, lignite, andpeak-load power run-of-river) that isdispatched ondemand(for Historically, grids have operated electricity onthebasisofvolatile aggregate demandfrom end-usersbeingmetby of increasing shares ofvariable renewable systems. generation into electricity additionto deploymentIn inend-usesectors, hydrogen could beusedfor energy storage, enablingtheintegration deployment3.4 Hydrogen asanenablerofrenewable electricity demand, andsynthetic methane isaninefficient source expensive. ofenergy andis very An obvious advantage isminimal disruptionto thegrid. However of current levels ofsupplybiogasfallfarshort www.worldcommercereview.com discussed, to thissupplyisexpected beconsiderably transformed. The current cost ofhydrogen structure from isbasedonitsproduction natural gas(methane).But, aswe have ofmarket4 Overview dynamics generationdeployment sources ofrenewable andonthedeployment electricity offlexible demandside resources. (arbitrage gain)exceed €50/MWh. The evolution ofthispotential for arbitrage gainwillinter aliadependonthe price differentials electricity showGerman that currently only for 5percent ofthetimedoesprice differential along withstorage. depend ontherelationship between seasonalprice differentials andthecapital costs ofdeploying electrolysers From aneconomically efficient perspective, whether hydrogen emerges asaseasonal storage mechanismwill almost independent ofstorage volume Compared to batteries, hydrogen isamore plausiblesolutionfor seasonalstorage becauseinvestment costs are geologically, months during oflower andthenconverted supply. backinto renewable electricity electricity seasons. Hydrogen could beproduced months during ofexcess stored production, renewable electricity Hydrogen could beamore produced usefuloptionfor in managing indifferent fluctuations renewable electricity Long-term seasonalstorage suitedgrids. than electrolysis to oreven managing onelectricity intra-daily intra-weekly fluctuations costs droptheir capacity dramatically asmore batteries are produced anddeployed. They may therefore bebetter particular,In storage systems battery that already feature muchlower storage lossesthanhydrogen willlikelysee 37 and ‘self-discharge’ islow (Parra etal2019). www.worldcommercereview.com Source: BruegelbasedonSMARD. Figure 7.Price differential, lowest vs highesthourly pricesGermany, in 2019 100 150 200 250 50 0 0% 5% 9% of more than€50/MWh An arbitage intertemporal 14% 18% 23% 27% intertemporal arbitage was arbitage €15/MWhintertemporal orless about75%ofthehoursmaximum In 32% 37% 41% 46% www.worldcommercereview.com also by thecost ofcompeting providers flexibility (eg. batteries, demand-response). Thus, ifbatteries continue their willbedetermined notonlyby inthisequilibrium thecostElectrolyser capacity ofrenewables andelectrolysers, but additional renewables investments economically could viableandanequilibrium develop. thosehourswhere exactly itiseconomic prices during to operate to them. pushupelectricity start This willmake Only whenthefixed costs ofelectrolysers reduce Butthentheywill enoughwilltheirusebeeconomic inpart-load. their fixed costs. However, whiletheinvestment cost ofelectrolysers remains high,theywillhave to runmostoftheyear to justify thanks to cheap. abundant power from isparticularly renewables and/orlow demand–electricity Thus, there ispotential for hydrogen lowered costs to befurther by runningelectrolysers onlyinhourswhen– low etal2018). prices (Bossmann highandvery be more hourswithvery areExpectations that, unlessthere are breakthroughs interms ofmore flexible power demand/storage, there might inthecaseofelectrolysis. fundamental driver ofsupplycosts willbethecost offuelinputs–electricity A further (Figuresector 8). The extent ofthiscost decrease willdetermine thecompetitiveness hydrogen oflow-carbon for eachend-use learning). by fallingelectrolyser costs (whichcanbereinforced by deployment policies that allow economies ofscaleand The consensus hydrogen market isthat theprice oflow-carbon willdecrease over thecoming years, largely driven www.worldcommercereview.com Source: Bruegel. sectors. panelshowsNote: left ascenario withlimited technological/commercial development onthedemandside;rightpanelshows ascenario withsignificant breakthrough inalldemand Figure 8.Stylised hydrogen demandscenarios Price of hydrogen

Ammonia/methanol

Steel Low demand Volume ofhydrogen Aviation Shipping

Trucks cost structure Supply at current Heating cost structure Supply at improved

Price of hydrogen

Ammonia/methanol Volume ofhydrogen Steel

Aviation cost structure Supply at current

Shipping cost structure Supply at improved

Trucks demand High

Heating www.worldcommercereview.com deployment currently beingdebated. this uncertainty. We hydrogen measures that conclude could withadiscussionof someofthepolicy support in thecontext of The today support challengefor isto policymakers level assessthecorrect ofpolicy andtype energy demandin2050. breakthroughs and endusecould inproduction mean hydrogen might even contribute 20percent oftheEU’s final The future ofhydrogen prospects Currently, are highlyuncertain. itisachemicalfeedstock butsignificant 5 Policy options hydrogen-utilising technologies reach commercial maturity. othersectors, products. ammonia,methanol, demandforproducts: In crudeoil-derived hydrogen willdependif level ofhydrogen to remain, theextent ofwhichwilldependon thedemandfor demandisalmostcertain theend The evolution ofhydrogen 3).Butwhatever (section demandwithinEurope happens, ishighlyuncertain acertain on European costs prices, would have althoughtransport 2. to befactored in,asdiscussedinsection ofthirdThe ability countries to produce hydrogen undermore favourable conditions may downward exert pressure othercasesthereIn isnoEuropean cooperation andhydrogen willpotentially betraded oninternational markets. Europe, suchasbetween Germany andMorocco (BMZ,2020). Non-EU countries are alsoinvesting inhydrogen capacity. production somecases, In thisinvolves cooperation with it isstillpossiblethat thecapitalcosts operation. ofelectrolysers willbetoo highto justifytheirpart-load rapid pace oftechnological advancement, demandbecome increasingly and/orinnovation flexible, seeselectricity www.worldcommercereview.com massive ramp upinadditionalhydrogen demand, whichwould bemetby carbon-intensive methods production Moreover, hydrogen until alow-carbon source at scaleissecured for Europe, there islimited value instimulating a hydrogen are production likelyto exceed thosefrom current demandonly. The whichcould widerange potentially ofsectors use cleanhydrogen suggeststhat thebenefitsofdecarbonising already avoid approximately 100Mtof CO We ofcurrent theproduction hydrogen option.Decarbonising classifythisasano-regret policy demandwould ofhydrogen fortheproduction withlow carbonState support emissions hydrogen low-carbon production Supporting the EUEnergy Taxation whichisalso scheduled for Directive 2021. (2003/96/EC), from electricity andtowardfrom electricity natural gas option. From emissionsstandpoint, acarbon theEuropean taxation system currently biasesconsumption away Addressing andnatural gasprices would thecurrent beanotherno-regret between electricity taxation discrepancy inlinewithtougher targets. emissionreduction (ETS) alternatives. 2021theEuropean In Commission willpropose to andtighten extend theEUemissionstrading system prices ontheuseoffossilHigher fuelshelpthecompetitiveness technologies ofalllow-carbon relative to fossil-fuel Tightening/extending theEUemissionstrading thedesignofenergy system taxation andre-thinking systems price onallgreenhouseMeaningful gasemissions Supporting low-carbon hydrogen low-carbon should thereforeSupporting priority. beapolicy 38 . The European Commission canaddress suchdiscrepancies by reforming 2 emissionsintheEUperyear. 39 . www.worldcommercereview.com choosing which products to support, and how much to support eachproduct. andhow muchto support tochoosing whichproducts support, already has a tool for defining low-carbon benchmarks in the ETSalready benchmarks product hasatool inthe for benchmarks defininglow-carbon and to avoid publicmoneybeingspent that onprojects eventually donotsignificantly reduce emissions. The EU This to would adoptaneutral allow standpoint regarding policymakers ofhydrogen theapplicability technologies, hasbeenachieved.only for reduction for products whichaclearcarbon-emissions wouldMarkets beallowed to manner decidethemostcost-efficient for production. Public revenue wouldbespent has theadvantage ofbeingtechnologically neutral. Focusing to andintermediate thedemand for products steel) low-carbon goods(suchaslow-carbon publicsupport intensive production inmarkets currently oflow-carbon products, dominated fortheproduction by particularly emissions- State support green products Supporting is likelyto makeEurope’s more competitive exports world. inadecarbonising From ageopoliticalstandpoint, developing commercial know-how intechnologies usedto produce cleanhydrogen iswillingto share someoftheremainingin whenindustry technology risk. would alsobea no-regret option. The deployment hydrogen ofotherlow-carbon shouldalsobephased production Policies generation thedeployment to ofrenewable fuelgrowing to support electricity demandfrom electrolysers done usingtools that proved successful for offeed-in windandsolartechnology (auctioning premia). The deployment ofasignificant to volume ofelectrolysersreduce shouldbesupported their cost. This could be 40 . Achallengewould be www.worldcommercereview.com limited range). vehicles) to invest ininnovation where basedonspecificcriteria alternative technologies stillhave alead(eg. to pressure exert Increased technology competition isalsoimportant ondominant technologies (eg. electric unexpectedly). transitiondecarbonisation optionswould more makethelow-carbon resilient (eg. ifothertechnologies fail potential pathways production could beexplored. for Public increasing thenumberofpotentially support viable Many potential hydrogen applications would benefit from R&Dinvestment. Onthesupplyside, a range of option. However, for different support prioritising areas ismore controversial. Europe invests too littleinto R&Din general (D’Andria for R&Disano-regret etal2017).Public low-carbon support forhydrogen researchSupport anddevelopment R&D Supporting modes oftransportation. while afocus light ondecarbonising vehicles batteries today have might instead theheadstart to extend allother competitiveness ofnewfuelcells andhydrogen tanksthat thencould beusedinlight vehicles, trains andaircraft, for therest oftheeconomy. For example, today afocus might boostthe transport heavy ondecarbonising into for account whilenotnecessarily taking adifferentsector that support technology may have widerbenefits This technologies isbecauseanexplicit focus prioritises that onesector are ondecarbonising suitablefor that technologies shouldbesupported. are ignored. The ofwhetherthestate questionthenarises isableto accurately predict and whichproducts One drawback to thissolutionmay bethat oneortwo technologies are over-supported, whileotheroptions www.worldcommercereview.com should slowly begin. householdsareIf to consume significant volumes of hydrogen, andinvestment clearly isnecessary repurposing The ofrepurposing necessity thegasgrid dependsuponthesize andgeographic dispersionofdemand clusters. reasonable cost itcould berepurposed for economy. alow-carbon The natural gasgrid constitutes asignificant infrastructure asset, capableofholdinglarge volumes ofenergy. At Public infrastructure investment to adaptthenatural gasgridto make hydrogen itsuitablefortransporting Retrofitting natural gasnetworks under-appreciation of R&Dfor ofthemerits long-term economic development. Finally, inthecontext ofthecurrent economic crisis, afocus oncreating jobsand high multipliersmight leadto an identify whichhydrogen technological applications justifypublicR&D. economylow-carbon could beidentified asabasis for today’s Suchamechanism would help publicR&Dsupport. advice to theEuropean Commission andinterested memberstates. For example, to future a bottlenecksintheshift could taketheform ofanindependentIt publicbody, aEuropean Energy Agency, whichcould provide policy mechanism would adaptto technological evolution inorder to avoid institutionallock-in allocate R&Dfunding to areas that appearmostattractive according to andpriorities. decarbonisation criteria The mechanismat theEuropeanA consistent level support andpredictable wouldIt bebeneficial.couldperiodically energy carriers. of limited R&Dbudgets thevalue ofhydrogen R&Dmustbeweighed againstR&Dincompeting technologies or There isastrong casefor Europe to significantly scaleupR&D for alldecarbonisationoptions. But, inascenario 41 . www.worldcommercereview.com the capacity of electrical solutionsto fullysatisfy householdenergy ofelectrical demand.the capacity whether to retrofit natural gas grids at amore granular level shouldbepostponeduntil clearer evidence emerges of for to asystem buildtheinfrastructure necessary oflarge hydrogen industrial industry clusters. over Decisions onenabling planning(5-10 years) shouldfocus activity andregulatory short-term addition,policymakers In and might needto bepubliclymanaged. Such adisorderly transition (whichwas seenfor somecentral heating ineastern Europe) networks canbeinefficient increasing speed. thatsubscribers itsremaining willbeartoo subscribers muchofitsfixed cost, leadingthem to unsubscribe at heating) is, thatto at electricity-based onestageinthetransition, theincumbent willlosesomany network first-best solution. twoThe challengeinthetransition between network-based systems (eg. gas-basedheating Therefore, while itistechnologically possiblethat hydrogen could satisfy householdenergy demand, itisnota largepipelines connecting demandandsupplysources investment. would bethe priority to thescaleofanything likethat resembling thecurrent natural gasinfrastructure. Instead, afew transmission Therefore, onbuildingoutahydrogen would aplanningperspective notplace much importance grid distribution of hydrogen ortransmission. production eachcluster,In hydrogen-using (eg. industries ammonia,steel, storage) carbon would co-locate andshare thecosts clusters (‘hydrogen valleys’) across Europe. analysis points to thelikelihoodofrelatively significant hydrogen demandemerging oflarge inaseries industrial However, itisnotclearifhousehold-level hydrogen demandwillever 3).Instead, ourdemand materialise (section www.worldcommercereview.com Hydrogen vehicle charging stations are for nottoday publicsupport. apriority charging might stations, consider offering policymakers smallincentives, policy. butthisshould notbealandmark route, options come for forward private withco-financing for publicly example). If consortia available hydrogen suchafutureIn scenario, private investment could cover therequired charging stations (at eitherendofatrucking vehicles. sector. As discussed, prices or tougher withhighercarbon policies, hydrogen solutionsmay beviablefor heavy shouldcontinueEuropean ofdecarbonisation policiesfor to increase thetransport policymakers thestringency charging stations.electric forThere hydrogen that isarisk publicsupport refuelling for stations would beat theexpense ofpublicsupport technology. electric case for battery to hydro- sectors 3,thecaseforsection atransition genappearsweak ofmosttransport whencompared to the However, for significant publicsupport hydrogen charging stations would likelynotbesensible. As discussedin pilots have (fewer already beensupported than100inGermany). hydrogen vehicles shouldstimulate private investment andpurchase intheproduction ofhydrogen vehicles. Some Hydrogen vehicle charging stations are anenablinginfrastructure. Providing themeansto refuel andoperate forthedeployment ofhydrogen vehicleState support charging stations ofhydrogenRoll-out vehicle charging stations policy. Current dynamicsdonotyet market suggestthat retrofitting naturalhydrogen gas grids to carry isasensiblepublic www.worldcommercereview.com markets canbeatoolmarkets for encouraging private coordination buy-in. Horizontal sector andvertical are bothcrucial Providing exemptions competition/network sometemporary regulation from strict rulesdesigned for mature Providing breaks orregulation from to therulesofcompetition encourage policy targeted investment Competition holidays policy/regulation theconversationstart abouthow Europe canbesure itshydrogen are low carbon. imports seen, butifsuchascenario emerges, Europe islikelyto beasignificant netimporter.It would bewise, therefore, to in cleanhydrogen. The extent to whichhydrogen willbecome aninternationally traded remains commodity to be shouldthinkabout designing a EuropeanWhileframework a difficult task, policymakers forthe international trade renewable simplybeen capacity ‘assigned’ to hydrogen production? beenbuiltexclusively capacity new renewable for electricity hydrogen purposes, orhasexisting oralready planned ofdedicatedtest: has donotpasstheadditionality But even often suppliesfrom certifications renewable electricity accounting, value thananobjective input. for electrolysis istakenfromWhen content electricity thepublicgrid itscarbon ismore amatter ofdefinition/ Designing arobust classification system willbedifficult. Forelectrolysis, this would certifying the electricity involve ‘greenness’ ofhydrogen imports. the emissionsare andsocarbon may alreadyfor under theETS, certifying benecessary priced in.Butcertification hydrogen consumption. Within Europe, becausehydrogen calculations shouldnotbenecessary falls production emissionsassociated thecarbon Knowing ofeachMWh withtheproduction ofhydrogen willbeanissuefor future asystemDeveloping forrobust classification ofthe carbon of content foreachMWh hydrogen scheme Certification for low-carbon hydrogen 42 . www.worldcommercereview.com 2. 90%isatechnical maximum. The range ofcarbon captured islikely to intherange be of60-90%.Capturing carbon 0.03 milliontonnes isabout hydrogencomparability. or92millioncubicmeters ofRussian natural gas. TWh One we1. Inthispaper transfer allenergy units(electricity, foreasier hydrogen, natural gas, etc) into terawatt hour(TWh) Endnotes McWilliamsBen isaResearch Analyst, Fellow, andGeorg ZachmannaSenior at Bruegel high benefits. ■ bothcases,In suchexemptions andwell targeted must betemporary sotheyencourage investment inareas with for testing newtechnologies, protocols suchasthecorrect for usinghydrogen inhouseholds. Additionally, breaks regulatory canhelpencourage breakthrough R&Dandinvestment. thecase This isparticularly hydrogen pipeline, storage or steel-plant) alsowork. individual investment ofthenewvalue chain(eg. (eg. a anelectrolyser) ifallotherparts isonlyworthwhile There isacoordination problem, withinvestment into allelements needingto besynchronised becauseeach integration(through vertical orbindingagreements), private investment may bediscouraged insomeareas. Without to ensure theability theprovisioning elements ofthehydrogen ofthecomplementary value chain and consumption ofhydrogen needto bewell synchronised. For stagesofbuildinganewnetwork. theearlier during example, initialinvestments transmission intheproduction, www.worldcommercereview.com Upper bound assumes20percent bound Upper fleet,mediumandlower hydrogenbounds fuelcell composition for2050light-duty 11. Figures estimated usingthe growth rates inlightcommercial figures to 2050from European Commission (2018). 15 percent and1percent respectively. assumes25percentbound hydrogen fleet,mediumandlower fuelcell duty bounds assume composition of 2050heavy 10. Figures estimated usingthegrowth trucksto 2050from rate European duty Commission inheavy (2018).Upper lower. demand basedon15percent ofthevehicle hydrogen stock in2050being fuelcell, 5percent formedium,and0percent for 9. Figures estimated usingthegrowth rate inpassengervehicles assumedby European Commission (2018).Upper each setofnumbers brieflyexplainstheunderlying calculations. (European Commission, 2018).Additional sources are usedto complement ouranalysisinmany cases. Afootnote below calculations8. Our are predominantly builton interpretations oftheEuropean Commission’s ‘Clean Planet forall’strategy production. etal(2016)alone fromwould enable around Korfiati 12,000Mtof hydrogen potential ofsome600,000TWh/year 7. Solar supplycompared toelectricity conventional electrolysers. capacity. because PEMelectrolysers are ableto adjustdemandinresponse more to This quickly fluctuating isimportant REFHYNE project (https://refhyne.eu/) willinstallandoperate theworld’s largest hydrogen PEMelectrolyser with10MW thedevelopment ofproton electron membrane supporting (PEM)electrolysers. For6. The EUisinparticular example, the from methane andfrom electrolysis are available. 5. Estimates usingIEAdata.This illustrative example assumesthattherequired installationsforhydrogen production 4. Infact, we consider acarbon price three of€50alikely years. forthenext bound upper prices staysaround €20. settle ataround €50, andhttps://www.powernext.com/futures-market-data where an indexofEuropean natural gas https://www.eex.com/en/market-data/power/futures3. See where futures energy attheBelgian exchange frequently 60and90%isrelativelybetween more expensive. www.worldcommercereview.com 20. Production ofhydrogen from methaneemits1.83tonnes ofCO from different finaldemandsforammoniaintheEU2050. 19. Basedontheassumptionofa178kilogramme hydrogen requirement tonne per ofammonia. The variation arises 18. For thewholechemical sector, notjustammoniaandmethanol. 17. Upto 41percent withchemical emissionsusedto sector represent methanolandammonia. 16. Biofuelsfrom seaweed could address thisissuebutare notyet commercially proven Europa, (Bellona 2020). CO 15. The impliedmitigationcost ofusingpower-to-liquid to produce syntheticjetfuelwould intheorder be of€800/tonne emission fuel. is produced from green electrolysis andcarbon dioxide iscaptured from theair, this can theoretically azero-carbon be carbon dioxide inorder to produce hydrocarbons withasignificant commercial value (eg.When methane).hydrogen 14. Synthetic fuelbroadly refers to theconcept ofachemical fuelsynthesisinwhichhydrogen isreacted withcarbon from demand iszero inthecase thathydrogen notdevelop. technology does Mediumismidpoint. substitutes thisdemand, are used. 20percent Of isassumedto metby be from syntheticfuelproduction hydrogen. Lower percent ofdemandmetby directhydrogen (ie. theremaining fuelcell 70percent, +combustion). jetfuelorequivalent Of 13. Total energy inEUtaken demandforaviationsector from European Commission demandassumes30 (2018).Upper arise ifammoniawere usedasafuel. fromthe shippingsector European Commission (2018).These figures exclude indirectdemandfor hydrogen that would 12. Figures andhydrogen-pessimistic estimated onthebasisofhydrogen-optimistic scenarios forfinalenergy demandin assume 5percent and0percent respectively. 22. See https://www.consilium.europa.eu/en/press/press-releases/2019/05/21/eu-adopts-new-rules-on-fertilisers/ 22. See companycompany Yara andfertiliser Ørsted (Durakovic, 2020). 21. For example, a100MWwind-powered renewable hydrogen plantintheNetherlandsdeveloped production by power 2017). 2 (Pavlenko etal2019). 2 per tonne per ofammonia(BazzanellaandAusfelder, www.worldcommercereview.com 34. See https://ec.europa.eu/energy/topics/energy-efficiency/energy-efficient-buildings/renovation-wave_en34. See 100 percent reduction. Mediumandlower linearlyextrapolated to zero. scenario achieved an80percent reduction inemissions. We assumedaslightlyincreased hydrogen demandto reach a 33. Based on modelling results33. Basedonmodelling from European Commission demandistaken (2018).Upper from theH https://www.ssab.com/company/sustainability/sustainable-operations/hybrit 32. HYBRIT inSweden isawell-known example. See steel31. Recycled can contaminated be withotherelements, mostcommonly copper. This reduces ofsteel. thequality well30. As as removing ofemissionswhichare associated withthereduction ofiron themajority ore. therefore have positive gridswithlotsof spillover fordemand inelectricity variable effects response renewablepower. arc29. Electric furnaces can andstopped. rapidly alsobe insteel towards production Ashift started could electricity https://ec.europa.eu/growth/sectors/raw-materials/industries/metals/steel_en28. See steel. percent DRI/50percent scrap steel. Mediumassumes 75percent EAFandfeedstock of50percent DRI/50percent scrap 60 percent directreduced iron (DRI)/40percent scrap Lower steel feedstock. assumes50percent EAF, andfeedstock 50 assumedconstant attoday’s27. Demand level. arc assumesalldemandmetfrom Upper electric furnaces (EAF)with https://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx forexample26. See theInternational MaritimeOrganisation’s IMO 2020rule: demand foroilrefining. while assumingconstant demandforoilrefining. The scenarios onassumptions onthedecrease thendifferdepending in estimationsfirsttake25. Our IEAtrends for aslightdecrease in hydrogen requirements inoil refining from 2020 to2030 final methanoldemandin2050. 24. Basedonassumptionof189kilogrammes hydrogen tonne per ofmethanol. Variation arisesfrom differences inEU withlower emissions.electricity can23. Ammonia combusted be to produce electricity. asmallscale, On itiscurrently co-firedin coal plants to produce 2 scenario –this www.worldcommercereview.com sources. in thelongerterm, additionaldemandfrom increasing metbe electrolysis mightbe supply, potentially from renewable or last(marginal) power plantrequired thelastoptionseemsmostplausible, to meetthe demand. but Intheshort-term, usedforeachhourinwhich theelectrolyser wasbe used:cleanestpower plant;average power plant power plant;dirtiest 42. For electrolysis, itwould require definingthe different andthree carbon contentvery oftheusedelectricity values can discussion. Zachmann41. See etal(2012)p99,forfurther can therefore product. thought be ofasthebest-practice ofaparticular emissionsassociated withproduction is basedontheaverage 10percent ofinstallations. greenhouse They performing gasemissionsassociated withthebest 40. Product have benchmarks calculated been forarange ofemission-intensive This benchmark undertheETS. products highest demandcase difficultfor would Europe. currently very be for thedecarbonisation ofhydrogen supplywithinEurope. Supplyingthevolume ofcleanhydrogen suggested by our eventually ‘catch up’. There isclearreason to thisargument, butwe believe thataclearer route mustbe established first 39. There pursuingdemandcases isan argument thatitis stillworthwhile today andthatcleanhydrogen supplywill factsheet_on_taxes.pdf 38. This DGENERfactsheet shows the discrepancies in taxation rates: https://ec.europa.eu/energy/sites/ener/files/qmv_ hydrogen andback–while thesize ofthestorage tanks/aquifers(ie. notdrive does cost theMWh) thatmuch. 37. Mostoftheinvestment cost oftheappliances isrelated into thattransform to thecapacity (ie. electricity theMW) sources. 36. Refinedfrom biogas, whichisproduced through anaerobic digestionof waste ororganic matter from a of variety households. issues, theexample clearlyillustrates thatrequires theagreement thechallengesassociated withapolicy ofindividual reasons, amainreason hasbeen fordelay(Tounquet heatpumpsshouldnotpresent andAlaton, 2020).While privacy Most recent estimates suggest figurepercent. thattheactual 43 isabout Lack of consumer acceptance, forprivacy often meters intheEU2020would 72percent.35. In2014,itwas be smart estimated thatthepenetration ofelectricity www.worldcommercereview.com D’Andria, D, D Pontikakis andASkonieczna (2017)‘Towards aEuropean R&DIncentive? assessmentof R&DProvisions An publication/7e4afa7d-d077-11ea-adf7-01aa75ed71a1/language-en of key costs andbenefits, European Commission, available athttps://op.europa.eu/en/publication-detail/-/ Cihlar, J,AVillar Lejarreta, AWang, FMelgar, (2020)Hydrogen JJens, generation andPRio inEurope: Overview 01142-01-e.pdf 2030, CONCAWE 1/13R,available athttps://www.concawe.eu/wp-content/uploads/2017/01/rpt_13-1r-2013- report Catalá, F, RFlores La Fuente, De refining perspectives andJKawula (2013)Oil intheEU2020,with to WGardzinski sites/ener/files/documents/metis_s14_electricity_prices_and_investor_revenue_risks_in_a_high_res_2050.pdf of variable RESinthepower system’, METISStudiesS14,European Commission, available athttps://ec.europa.eu/energy/ T,Bossmann, LFournié market andGPVerrier prices, revenues (2018)‘Wholesale andrisksforproducers withhighshares securing-a-global-leadership-role-on-hydrogen-technologies.html Cooperation available andDevelopment, athttps://www.bmwi.de/Redaktion/EN/Pressemitteilungen/2020/20200610- Strategy andestablishesNationalHydrogen Council’, press release, 10June, Federal German forEconomic Ministry agloballeadershiproleBMZ (2020)‘Securing onhydrogen technologies: Federal Government adoptsNational Hydrogen Status’, Energies, 13(8):1894,available athttps://doi.org/10.3390/en13081894 NandBVadBertelsen, Mathiesen(2020)‘EU-28ResidentialHeatSupply and Consumption: Historical and Development sites/3/2017/03/FACTSHEET-seaweed-for-energy.pdf EuropaBellona (2020)‘Factsheet: Pros andCons forBiofuel’, Seaweed available at:https://bellona.org/assets/ energy_and_feedstock_for_the_European_chemical_industry.pdf available athttps://dechema.de/dechema_media/Downloads/Positionspapiere/Technology_study_Low_carbon_ Bazzanella, AandFAusfelder (2017)Low carbon energy andfeedstock fortheEuropean chemical industry, DECHEMA, airbus.com/newsroom/press-releases/en/2020/09/airbus-reveals-new-zeroemission-concept-aircraft.html (2020)‘AirbusAirbus concept reveals aircraft’, newzero-emission press release, 21September, available athttps://www. 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Rail%20Renaissance_2.pdf GermanWatch, available athttps://germanwatch.org/sites/default/files/Connecting%20Europe%20with%20a%20 L(2020)‘ConnectingDonat, Europe withaRail Renaissance: Eightmeasures to revive theEuropean rail system’, wptsr201703.pdf Commission, Seville, available Research Joint Centre athttps://www.econstor.eu/bitstream/10419/202249/1/jrc- (JRC), under aCommon Corporate Tax Base’, Working JRC Papers onTaxation andStructural ReformsNo. 03/2017,European www.worldcommercereview.com Working Paper 2019-05,The International Council onCleanTransportation, available at:https://theicct.org/sites/default/ alternativePavlenko, jetfuelsintheEuropean cost Union’, ofsupporting andAChristensen (2019)‘The N,SSearle sciencedirect.com/science/article/abs/pii/S1364032118307421 for deepdecarbonisation’, Renewable andSustainableEnergy Reviews101(3):279-294,available athttps://www. Parra, D, LValverde, FJavierPino andMPatel (2019)‘A review ofthe role, cost andvalue ofhydrogen energy systems S1364032116305366 Sustainable Energy Reviews, 67:597-611,available athttps://www.sciencedirect.com/science/article/abs/pii/ Nikolaidis, PandAPoullikkas (2017) ‘A comparative ofhydrogen overview processes’, production Renewable and C(2020)‘AmmoniaMiddlehurst, flagged asgreen shippingfuelof thefuture’, Financial Times, 29March car-that-the-energy-industry-loves.html February, available athttps://www.nytimes.com/2003/02/02/weekinreview/the-nation-the-hydrogen-economy-a-green- Nation:The Hydrogen Economy; AGreen Loves’, CarLizza, R(2003)‘The That theEnergy Industry The NewYork Times, 2 Energy Planning andManagement 9:17-30,available athttps://doi.org/10.5278/ijsepm.2016.9.3 Energy PotentialGlobal Solar andPhotovoltaic Data’, Cost withtheuseofOpen International ofSustainable Journal A,CGkonos,Korfiati, F SGrassi,Scenkeln,Gaki, Veronesi, A R S Volkwein, M Raubal andLHurni(2016)‘Estimationofthe 42(19): 13311-13320,available athttps://www.sciencedirect.com/science/article/abs/pii/S0360319917300083 analysis oftheworldwide largest Power-to-Gas plantwithPEM electrolysis’, International ofHydrogen Journal Energy Kopp, M,DColeman, CStiller, KScheffer,Scheppat (2017)‘Energiepark Mainz: Aichinger andB A Technical andeconomic available athttps://www.sciencedirect.com/science/article/pii/B9780128148532000035?via%3Dihub ALanziniSantarelli, andDFerrero (eds) Hydrogen Production, Solar Processes, Systems andTechnologies, Elsevier, Kayfeci, M,AKecebas andBMutlucan (2019)‘Chapter 3-Hydrogen production’, inFCalise, D’Accadia, MDentice M etp-clean-energy-technology-guide IEA (2020)ETPCleanEnergy Technology Guide, International Energy Agency, available athttps://www.iea.org/articles/ windows.net/assets/a02a0c80-77b2-462e-a9d5-1099e0e572ce/IEA-The-Future-of-Hydrogen-Assumptions-Annex.pdf www.worldcommercereview.com This article isbasedontheBruegelPolicy Contribution Issuen This article our-expertise/focus/transition/hydrogen-production-costs-to-2040-is-a-tipping-point-on-the-horizon/ Wood Makenzie (2020)‘Hydrogen costs: production near?’available isatippingpoint at:https://www.woodmac.com/ European Commission, available athttps://www.buildup.eu/sites/default/files/content/mj0220176enn.en_.pdf Tounquet, metering deployment intheEU-28,Tractabel smart FandCAlaton (2020)Benchmarking and Impact of hydrogen inglobalenergy scenarios’, SustainableEnergy Fuels 4(80),available at:https://doi.org/10.1039/C9SE00833K C,OTlili, LWelder,Quarton, curiouscase of theconflicting CMansilla,HBlano,roles (2020)‘The HHeinrichs…SSamsatli ofRegulation,availableSchool athttps://fsr.eui.eu/publications/?handle=1814%2F68977 Piebalgs, A,CJones, Reis,Decarbonisation PCarlo andJMGlachant(2020)Cost-Effective GSoroush Dos Study, Florence files/publications/Alternative_jet_fuels_cost_EU_20190320.pdf o 08/21 | April 2021 08/21 |April www.worldcommercereview.com adapted to newforms ofcommunication, andlooksaheadto Ed considers Bolen how thebusinessaviation community connected ourindustry connected the return ofin-persongatherings post-pandemic Virtual EBACEVirtual www.worldcommercereview.com E innovative than ever. isevolving,than justreturning to a“new normal”;ourindustry coming backstronger, more adaptive andmore and to planfor ourpost-pandemic world. The event madeclearthat businessaviation isfocused on muchmore toEBACE thebusinessaviation bring together community served Connect to share acommon visionfor thefuture embrace thefuture, andfire theimagination. focus onnewopportunities exhibition soared beyond anddemonstrated expectations theglobalbusinessaviation community’s to eagerness Held 18-20May andpresented by theEuropean BusinessAviation Association (EBAA) andNBAA,thisonline event for 2021,EBACE Connect. However,pandemic becameknown. I’m pleasedto note we’ve recently editionofthe wrapped asuccessful virtual eventsExhibition (EBACE) to becancelled was oneofthefirstmajor industry last year asthefullscope ofthe WorldAs Commerce Review readers know, the2020editionofEuropean BusinessAviation Convention & highly-effective tools as we navigated the COVID environment. convention andimmersive ofthelatest virtual news platforms inourindustry allprovedsummary to bevitaland “lockedour world down” andourindustry around theglobe, NBAA’s News Hourwebinars, Daily ourNBAAInsider At NBAA,we revamped ourentire environment. modelfor withourmembersto utilize connecting thevirtual With aviation adapted community to newforms ofcommunication. displayed inrespondingour industry to theCOVID-19 pandemic, thebusiness includingby how quickly ven more thanoneyear later, Iremain amazed andhumbledby thetremendous innovation andresilience www.worldcommercereview.com audience that 100international includednearly registered journalists to cover theevent. sustainability. providers announced OEMsandleadingservice exciting Major andofferings newproducts to an covering advanced airmobility, safety regulation for newtechnologies, growing beyond COVID, trends market and The future was infocus throughout EBACE Connect’s roster ofpanelsessionsand Leadership’‘Thought discussions, major businessaircraft OEMshighlighted theirperspectives. greatinsights onthenext era inaviation, whileday two featured aLightningsessionwiththeCEOsofall Round leaders andvisionaries. Famed pilotandphilanthropist Lindbergh Erik openedtheprogram by personal sharing More inEBACE than1,600attendees participated Connect, whichfeatured keynote discussionswithaviation innovative and sustainable future sustainable and innovative stakeholders worldwide embrace a promising, promising, a embrace worldwide stakeholders of much brighter days ahead, as business aviation aviation business as ahead, days brighter much of I believe NBAA and our entire industry are confident confident are industry entire our and NBAA believe I www.worldcommercereview.com Details ofthisandothernew offeringsDetails willbe available inthemonths ahead at nbaa.org/bace andpowerplant (A&P) flyingsafelyairframe mechanics whohave throughout thepandemic. keptourindustry latestthe show floorhighlighting the resourcesvery available to the aviation maintenance technicians (AMTs) and Attendees willalsoexperience several newfeatures ofNBAA-BACE, includingadedicated Maintenance Pavilion on as hundreds andfirst-time ofprominentexhibitors alike. stalwarts businessaviation OEMs, industry unprecedented roster ofimpressive, keynote speakersandsessionpresenters, dynamicandforward-looking aswell together again,NBAA-BACE this year inbringing willfeature ourindustry keepingwithitsuniqueimportance In an Halls.between theCentral andNorth appreciate that allexhibitors willbehosted inasinglearea, unlikepastyears inLas Vegas that splittheexhibit floor also features anexpansive, 14,000square foot outdoor terrace for receptions. NBAA-BACE attendees willfurther Featuring 600,000square feet of exhibit space andtheequivalent of80newmeetingrooms, theLVCC West Hall Vegas Convention Center (LVCC). attendees alike, andwe’re closeto sellingouttheExhibit FloorWest at theall-new, HalloftheLas state-of-the-art (NBAA-BACE) to Las Vegas, 12-14.Interest NVfrom inthisevent October hasbeenstrong from exhibitors and to anexciting, bring NBAA isalsoworking in-person2021editionofourBusinessAviation Convention &Exhibition Palexpo inSwitzerland, scheduledto takeplace 23-25May. lookforward toagain, inperson,andwe thereturn and ofanin-person2022EBACE certainly to Airport Geneva While EBACE anticipates was Connect eagerly anunquestionable success, meetingtogether once ourindustry Joining together once againasanindustry . www.worldcommercereview.com Bolen isPresidentBolen andCEOtheNational BusinessAviation Association (NBAA) Vegas. ■ innovative andsustainablefuture. We experience inLas lookforward to welcoming you to atrulyone-of-a-kind confident ofmuch brighter days ahead, asbusiness aviation stakeholders embraceworldwide apromising, we contrast marked allfeltIn to theuncertainty thistimelastyear, are Ibelieve NBAAandourentire industry world’s leadingtrade association for thecleaningindustry. Additionally, theLVCC Council (GBAC) Advisory GlobalBiorisk hasearned STAR accreditation facility by ISSA,the highest standards for attendee safety, andcamaraderie for withoutlosingthecharacter whichtheevent isknown. consulting CrowdRX firm withleadingmedicalservices NBAA hasalsopartnered to ensure NBAA-BACE meetsthe www.worldcommercereview.com Osbaldeston andAdriana Kudrnová Lovera lookat thepotential Internationalisation, accreditation andthepandemic-Michael benefits that may emerge from thecurrent challenges linings Silver www.worldcommercereview.com T assumed.” collaboration,with internationalisation suchaspartnerships, mutual –only andexchange benefit are notarticulated More recently, that that “traditional heroriginal definitionhas the values acknowledged Knight weakness associated education” ofpost-secondary dimension into anddelivery thepurpose, functions hasbeenwidelyapplied. Knight’s 2003definitionofinternationalisation as“the process ofintegrating aninternational, intercultural orglobal What isinternationalisation? environmental elitismand otherethicalconsiderations. impact, approaches to international education already faced challengesdueto concerns aboutsustainability, While the current coronavirus pandemichasbeenaprofound shockto many ofthesestrategies, traditional universities. internationalisation isconceptualised, systematised andoperationalised withinthestrategic development ofmost has enhanced theinternational theways debate withintheacademy inwhich andledusto re-examine Greater international awareness ofissuessuchasclimate change, geopolitics, poverty, andradicalisation inequality international whenchoosingwhere perspective to study, deliberately often choosingto goabroad. are increasingly organised internationally withaglobalfocus; andstudents have an increasingly beentaking There are different reasons for this:theissuesfaced by employers are increasingly global; companies andNGOs leadership roles inaglobal world. years dueto theincreasing realisation that universities have aresponsibility to prepare students for university leadersaround theworld for decades, butthetopic hasachieved greater prominence inrecent he internationalisation ofhigher education has beenontheagendasofnational governments and www.worldcommercereview.com knowledge theyproduce into therange ofcontexts …” research excellence …,someuniversities have failed to develop theappropriate infrastructures to translate the notes that “inengagement, theabsence butarecent ofprioritising engagementover European (TEFCE) report There isanincreasing focus onhow internationalisation contributes to outreach, socialresponsibility and (by and all studentsandstaff to make De ameaningful contribution to society” Wit). The was description thusexpanded, withtheadditionof“in order to enhance of education thequality andresearch for international strategies international with more flexible, innovative and collaborative collaborative and innovative flexible, more with ecosystem may develop its own immune system, system, immune own its develop may ecosystem from the current challenges. The business education education business The challenges. current the from ... a ‘silver lining’ may emerge for business schools schools business for emerge may lining’ ‘silver a ... www.worldcommercereview.com higher education generally, andstudents inmanagement education faculty tend to bemore mobile internationally, internationalisation to expand theirreach additionto theglobalissuesthat anddemonstrate In affect their worth. ishardly surprising,It then,that many leadingschoolshave increasingly theirattention turned to theoretical; insufficiently global, integrative and collaborative; in values, ethics andsocial andlacking responsibility. of theglobaleconomic recession. Businessschoolshave beencharged withbeingtoo analytical, insularand Yet despite thissuccess, there hasalsobeenincreasing inrecent criticism by years, thefrustrations fuelled inpart they have become oneofthemajorsuccess stories inhighereducation Although there have beenuniversity-based businessschoolsfor over acentury, years that itisonlyinthelast fifty emerging economies. currently over numbering 15,000worldwide withnewadditions beinglaunchedalmostdaily, in particularly recentIn decades, businessschoolshave spread through America rapidly Europe from North to Asia andbeyond, faculty, research and publications –andabusinessonecustomers, revenue andprofitability. they have become oneofthemajorsuccess stories inhighereducation, bothfrom – anacademicperspective Although there have beenuniversity-based businessschoolsfor over acentury, years that itisonlyinthelastfifty Internationalisation ofmanagement education with more focus onthedevelopment ofinternational relevance andoutreach. connections. Yet there isanargument for rebalancing attention towards processes that are more outcome-related, publications, diversity, student andfaculty andnetworks, andinternational international corporate partners Assessments of internationalisation have generally focused issuessuchasrelevant onstructural research and www.worldcommercereview.com 35 countries. rebranded asEFMD Programme Accreditation –with120programmes currently accredited at 89institutions across was notlong beforeIt EFMD alsolaunchedtheEuropean Programme Accreditation System (EPAS) in2005–recently “1% ofleadingbusinessschools.” elite group ofinstitutions(currently 191schoolsin45countries) to state withconfidence ofthe that theyare part and improve oftheiroperations. oftime, inallaspects arelatively period Over quality EQUIShasenabledan short EQUIS was designed to provide businessschoolsinEurope –andlater worldwide –witharigorous tool to assess towards thelaunchofEuropean Improvement Quality System (EQUIS)in1997. Foundation for Development Management (EFMD, originally founded in1971)to seize theinitiative andwork was notuntil the1990sthat thegrowingIt demand for aEuropean approach to accreditation ledtheEuropean later followed by otherprogramme accreditation systems limited to specific countries. The accreditation schools, American over agowithafocus ofmanagement education onNorth acentury started Internationalisation andaccreditation increasingly cross-cultural. management research disseminated through publications, journal books, materials, caseandlearning hasbecome to enhance thedifferentiation, withanarray ofdifferent international strategies beingemployed. Atthesametime, As management education hasbecome increasingly competitive, ithasbecome crucialto useinternationalisation but alsothemostsought-after Master’s degrees intheworld). and whiletheyaccept higherbenefits(for highercosts they alsoexpect example, someMBAs are thehighest-priced www.worldcommercereview.com business schoolsinEurope, Asia and theAmericas. to assessinternational application across itispossible to alldimensionsandthusensuring recognise top-level ofthelocalcontext beforeAssessment begins withanunderstandingof theparticularities progressing ofquality thenatureall types, italsoinevitablyreflects ofdiversity encountered withinitsoriginating geographical region. The of criterion ‘respect for diversity’ caseinpoint. isaparticular While EQUISisdesigned to promote diversity of ensure that itcanbeappliedinallregions oftheworld, especiallyinrapidly emerging economies. from applyinguniversal standards inwidelydiffering international contexts andthesystem hasthusevolved to Although EQUISwas originally designed withinaEuropean context, ithasalsorecognised thedilemmasthat result dimension throughout aschool’s activities. However, itisalsofirmly grounded onseveral transversal issues,for aninternational oneofwhichislooking education at alllevels withoutimposingstandardisation ofprogramme design, course content mode. ordelivery and cultural contexts. doesnotpromote It any ‘one bestmodel’ ofabusinessschool, butrather embraces higher From EQUISwas conceived thestart, asanaccreditation system rooted for inrespect diversity ofinstitutional need to meet andcontinue to achieve internationally agreed standards. quality become a prerequisite into for someprestigious –andalsorecognise entry rankings) improvement through the the award labelthat isvalued worldwide ofaquality by students, faculty, employers andthemedia(having now EQUIS aimsto recognise andpromote assessment quality inthe world’s quality bestbusinessschools–through from EQUISisnow regarded goldstandard” for as“the international businessschoolaccreditation. After more years thantwenty ofcontinuous development, theFinancial Times stated that accreditation five-year www.worldcommercereview.com assess thiscomplex andmulti-faceted concept. of whichhave takenplace across international allneedto boundaries) beconsidered ifwe wishto understandand institutional collaboration andtheemergence andpartnerships, ofmergers andotherforms (many ofrestructuring schools, thedissemination methodologies, ofonlinelearning theestablishment ofsatellite campuses, increasing thesamebroaderIn context, othermore recent developments suchasthegrowth ofjoint programmes inbusiness the world, andexposure that encourages international andemployment. mobility explores international challenges, education that incorporates aninternational andisaccessible curriculum across Further, deeperevidence ofthedegree ofinternationalisation canbereflected, for instance, by research that internationalunexpected shockssuchasthecurrent globalpandemic). an increasingly world globalmanagerial (and, anissuewhichwe willreturn to later, how aschoolresponds to of internationalisation results from anassessment ofhow aschoolhasadapted itseducation andresearch to While a school’s cultural diversity, measured by nationality, is, ofcourse, amuchdeeperunderstanding important, faculty, schoolsandrecruiting board organisations. members, together partner withadvisory beenperceivedInternationalisation hasoften asbeingreflected inthemixofnationalities amongststudents and what ismeant byexactly theterm ‘internationalisation’ andhow bestdowe assessit? ofEQUISaccreditationAt isanissuewhichhasengendered theheart continuous debate since its foundation: ofmanagementorganisation education across anddelivery theworld. of localconstraints. itisafeature Rather ofanassessment process capableofaccepting widedifferences inthe However, thisinherent doesnotimplyany flexibility lowering of expectations regarding standards quality because www.worldcommercereview.com 2. 1. Policy international strategic withpresent objectives vs plannedfuture profiles. its international improvement quality over journey timewithpastvs present profiles, or to illustrate itsfuture This model (whichhasbecome asthe colloquially known ‘Spider Diagram’) alsoenablesaschoolto demonstrate together withitsrelative strengths improvement. andareas for further on asimplelow/medium/high scale, these produce anoverall profile oftheaschool’sextent internationalisation, Profile). dimensions(allincludedwithintheEQUISQuality encompasses threeEach category further When assessed mixandincorporatenationality awiderrange ofinternational measures, grouped into four broad categories: of abusinessschool, EQUIS developed amodel(firstlaunchedin2018)whichencourages us to thinkbeyond orderIn to assist academicleadersandaccreditation reviewers alikeinassessingthedegree ofinternationalisation A broader interpretation ofinternationalisation – what isthecompetitiveness, recognition oftheschoolininternational markets? andranking – Recognition/reputation resources for itsimplementation? Strategy –doestheschoolhave strategy awell-defined for internationalisation together withplansand • • • • Elements ofthewidernetwork to whichtheschoolbelongs Context Content Policy issuesinfluencingthewholeschool issuesresulting from theexperience ofthevarious stakeholders, and aspects of the learning anddevelopment ofthelearning process aspects www.worldcommercereview.com 10. Network 9. 8. 7. Context 6. 5. 4. Content 3. employers, includinginternational companies with domesticoffices? office withan intercultural mixof professional staff? international/partnerships/exchanges an there is – Professional staff international spread ofalumni? Students/exchanges/alumni –what andexchange istheintercultural students andthe mixofdegree-seeking Faculty/visiting professors –what istheintercultural andexperience mixofcore, andvisitingfaculty? adjunct English widelyusedfor materials, learning teaching andpublication? Competencies –are developed, global-mindednessandcultural sensitivity provided islanguagelearning andis Research anddevelopment what are– theinternational scope, dissemination andrecognition oftheschool’s R&D? internationally? qualification and executive education programmes andhow madeaccessible/disseminated isthelearning Curriculum/learning resources –what are theinternational perspectives, content andresources oftheschool’s Governance/advisory board –isthere aninternational dimensionintheschool’s system? governance andadvisory Executive education/clients/recruiters –doestheschoolhave international corporate linkswithclients/ www.worldcommercereview.com studies drawn from schoolsaround theworld. to highlight successful strategies to internationalise despite locallimitations andto disseminate illustrative case internationalisation, to raise awareness ofthechallengesandpotential pitfallsofbecoming more international, The research and findingswillbeusedto identify newopportunities strengthen current dimensions of their internationalisation inwidelydifferent national contexts and regions. transversalresponsibility andsustainability standards, andthediverse strategies whichschoolsadoptto increase These relate to schoolsbecoming more international, ofinternationalisation theintersection andtheethics, sources research andEQUISdata to andpublicisethebenefitschallengesofinternationalisation. further As was announced at theEFMD 2020Deans’ Conference management education; nonemore sothaninthecontext ofthecurrent coronavirus pandemic. new areas ofassessment andcontinuously evolve processes to andeven reflect anticipate developments in the EQUIS(andEPAS) accreditation system, there continue to beongoingpressures to redefine standards, introduce schoolshaveAlthough generally participating welcomed thisbroader interpretation ofinternationalisation within 12. 11. as satellite campuses, joint programmes andfranchised provisioning (where applicable)? professional networks? Activities abroadActivities –what istheschool’s level ofinternationalisation andquality outsideitshomecountry, such oftheschool’s –what isthequality Alliances/partners strategic international academicpartners, alliances and , the Quality Services team iscurrently usingexternal Services , theQuality www.worldcommercereview.com new opportunities. oftheirinternationalisation the long-term viability current strategies context by re-evaluating andsearching for While itistoo to early assesswhetherthesewillbecome permanentbarriers, someschoolsare responding to the acrossfaculty borders. pandemic, especiallyapproaches that rely heavily oninternational recruitment andexchange ofstudents and However, someoftheseapproaches may bemore affected thanothers by the constraints imposed by thecurrent examples ‘boxed’ throughout thistext). strategies, dependinguponthescope, size, resources andlocation ofaschool(asillustrated by thebriefcase that there isno ‘one bestmodel’ for internationalising abusinessschool. there Rather are ofsuccessful avariety More years thantwenty ofaccreditation experience drawn from across theworld demonstrated hasclearly Internationalisation strategies major consequences for how we understandinternationalisation. environmentbusiness schoolsfrom learning aclassroom to necessitated avirtual by thepandemicwillalsohave experience’ andaway from ideasof ‘enrolment andexchange’. The current andrapid transition seeninmany This may project alsoleadto anevolution inthelanguageofinternationalisation towards ‘participation and faculty. for international management research andeducation andtheconsequences for ofonlinelearning students and Party, to draw ontheexperiences from ofEQUISDeans across theworld inrelation to thebenefitsofdigitalisation addition,aDigitalisationIn Task Force ofanInternationalisation hasbeenestablished, withthesupport Working www.worldcommercereview.com on a stand-alone basis or in partnership withotherschoolsineachregion, whereon astand-alonebasisorinpartnership students canbeglobally A more strategy complex involves multi-campus ofinterlinked establishing aglobalnetwork campuses, either institution from scratch inanotherregion inorder to enhance management education provision globally. one region oftheworld together initiates to working buildanew ajoint withoneormore project otherpartners, A variation onthislatter modelisaninternational joint venture where anestablishedschoolorfoundation in resources, thenwithdrawing at alater stageonce thenewschool hasgainedsufficient strength andindependence. fledgelinginstitutions, located often indevelopingsupporting countries, withfinancial, humanandmanagerial locations to experience thecontrasting cultural settings. Another optionisschoolswhichhave invested in Here, canberecruited students andfaculty initiallyto eithersite andthenmove seamlesslybetween thedual school inadifferent geographical region. originally basedinasingleEuropeanperhaps location, choseadifferent path, establishingasubsequent ‘sister’ These schools have developed atrulyinternational where community predominates. nosinglenationality Others, national baseislargely irrelevant to theiroperations. designed from faculty, aninternational –curriculum, perspective students, research agenda,etc –suchthat the largeSome graduate schoolshave focused ondeveloping programmes is inasinglelocation where everything national baseislargely irrelevant to theiroperations. designed from faculty, aninternational –curriculum, perspective students, research agenda,etc –suchthat the largeSome graduate schoolshave focused ondeveloping programmes is inasinglelocation where everything www.worldcommercereview.com Efforts to Efforts contain thespread ofinfection, includingdomesticlockdowns, international travel and restrictions The onsetofthecoronavirus pandemicraised newquestionsaboutcurrent approaches to internationalisation. Internationalisation: current andanticipated ofthepandemic effects encouraged many schoolsinEurope andAustralasia to expand internationally onthisbasis. The demand from students, ChineseandIndian inparticular, to studyabroad, especiallyat postgraduate level, has secondments to buildanever-changing international community. by encouraging aninfluxofinternational exchange andpromoting students andvisitingfaculty overseas faculty Yet anotheroptionisindependent schoolswhichmay chooseto benationally basedbutinternationally open, schoolscould provide ofeducation thananyquality alone. oneofthepartner programmes are ofthesepartnership Some now sowell establishedthat theyare assessedasdelivering ahigher suchasresearchactivities networks, joint programmes orstudent exchange facilities. usingtheiraccreditation (often ofinternational status fortowith avariety partners develop selection) different A somewhat lesscomplex modelinvolves where anindependent schoolchoosesto work partnerships selected movingperiodically between locations. Faculty may contribute to research andteaching inany orallofthelocations orchooseto develop theircareers by accumulation. mobile, transferring from onelocation to anotherto complete theirstudiesonthebasisofinternational credit www.worldcommercereview.com pandemic, withadecrease ininternational student enrolment. with alarge percentageInstitutions ofinternational students amajorlossoftuitionfee risk income dueto the GBP to UKhighereducation institutions, comprising around five percent ofallincome. Figurescounterparts. 2020show that in2017-2018,Chinesestudent fees publishedinJanuary provided £1.7 billion increasingly dependent onincome from international students, whoinsomecasespay higherfees thantheirlocal Prior to thepandemic, many thoseinAustralia, universities, theUKandUSA,were particularly becoming strategies, thosewhichfocus on theinternational ofstudents andfaculty. mobility inparticular institutionsare impacts, nowBeyond grappling theseshort-term withtheimplications for someinternationalisation andsolidarity’.knowledge inresponseand bestpractices to thiseducational disruptioninorder to provide a ‘collaborative platform of tandem,accreditationIn agenciesandbusinessschoolassociations bodies, have ranking experience beensharing countries. time, many international andexchange students have sought greater by returning safety andsecurity to theirhome therevisiontraining oftheirteaching for methodologies, to support faculty are to beapplauded. Yet at thesame whichcanthenbedisseminated learning This worldwide, rapid transition to virtual accompanied by pedagogical online.continue theiractivities campus closures, have many left international students inlimbo, whilemany institutionshave to adapted quickly www.worldcommercereview.com abroad could beputoff by ever tighter visa requirements, ofvisas to beprocessed, abacklog and ‘unwelcoming’ or ofmovement additionto therestrictions In across borders imposedby thepandemic, students intending to study academic year. institutions intheUSmay seeaminimum30percent declineininternational student enrolment inthecoming student applications in2020compared to theprevious year, are warningthat highereducation andsomeexperts by August IIEfoundIn 2020,asurvey that more than halfof520USinstitutionshave seenadeclineininternational countries. it ispossiblethat thepandemic, together withotherfactors, may indeedchangetheflows of students to different Whether prospective international students willchooseto studylocallyinthefuture However, remains uncertain. still hopedto travel abroad for theirstudiesinthenearfuture. different country.More thanhalfofthestudents surveyed were notinterested instudyingonline, and53percent international students are considering changing theirplansandnow wishto postponetheirstudies orstudyina A more 2020by recent Times inOctober HigherEducation survey found that over 50percent ofprospective remaining students (27percent) were considering postponingtheirstudiesorenrolling inonlinecourses. planned to enrol incourses abroad inthefollowing sixmonths were continuing withthesamestudyplans; found ofprospective from students that (73percent) amajority Studyportals A March 2020survey whohad ofitsfeelose asubstantial income proportion ifenrolments were to drop significantly. international recruitment, hasastudent bodyofmore thantwo thirds international students andcould standto For example, theworld-renowned London ofEconomics, School likemany schools, hasinvested heavily in www.worldcommercereview.com Global Focus Magazine Focus Global in published first was article This CranfieldManagement,School of and Adriana Kudrnova LoveraManager, is EQUIS,EFMD Professor Osbaldeston EFMD, isAssociate Services, Michael ofQuality Director andFormer of Director education. may bemore open,more and increasingly selective flexible inhow theyplantheirinternational management maySchools become more resilient, more relevant andbetter prepared for future disruption,whilestudents system, withmore flexible, innovative and collaborative international strategies. business schoolsfrom thecurrent challenges. The businesseducation ecosystem may develop itsown immune Whatever problems, theshort-term somecommentators have suggested that a ‘silver lining’ may emerge for from theirmore liberal immigration andpost-study regulations. of theirrelatively successful containment anglophonecountries ofthevirus. suchasCanada may Other alsobenefit Countries suchasNewZealand andAustralia may increase theirshare ofinternational students globallyasaresult the perception that somecountries have better managedthepandemicmay alsosway student plans. over experiences reported even recent discriminatory months by foreign students insomecountries. Furthermore, ■ www.worldcommercereview.com Jonathan says Sharp now isthe time to adaptcompany strategy andculture to respond to thechanging Time likea to act business environment start-up www.worldcommercereview.com A model neededto bereconsidered inthewake ofCOVID-19. by conducted FuturumA survey and Europe America revealed Research inNorth that 57%saidtheirentire business toBack thedrawing board environment andmarket. Now isthe timeto beagile andadaptyour strategy andculture accordingly so you canrespond to thechanging will suffer as result. businesses needto recognise that iftheydon’t press to thenthey behave thereset button andstart likeastart-up Traditional companies are setintheirways often withrigid hierarchies, andprocesses. boundaries After thisyear, percentage growth growth since 2011andthehighestactual onrecord. in 2020compared with2019. This isequivalent to a12.3percent increase year onyear, whichisthehighest The pandemic hastriggered record numberofcompanies created, 84,758businessessettingup withanextra leadingthewayStart-ups to theway we work anddobusinessare required world inthemodern andlife lockdown. after These thingswere happeningalready to someextent butnow businesseshave finally realised that thesealterations customer from experience home. andpeopleworking even thoughit was enforced were theaccelerated changesthat occurred suchasdigital transformation, a start-up, beingmore opento changeanddoingthingsdifferently. Oneadvantage to thepandemic ayearfter oflockdown andlife upsidedown beingturned businesseswillneedto adoptamindsetlike www.worldcommercereview.com operations andprocesses to deliver aseamlesscustomer experience. ideaitisabouttheexecutionis notjustabouttherevolutionary whichneedsto beintegrated into thebusiness’s withinnovative that disruptthemarket consumers demand.Start-ups andservices However, products today it andinnovateDisrupt is timeto tackstock andevaluate what hasandwhat hasn’t worked over oftime. thisperiod and suppliers, we andmaybe offer even andservices processes. adaptingtheproducts and internal and external It thelastyearDuring alothaschangedinhow we how we work, dobusinesses, dealingwithcustomers, partners moving and not to stand still stand to not and moving and accept change and that we need to keep keep to need we that and change accept and The COVID-19 pandemic has taught us to be agile agile be to us taught has pandemic COVID-19 The www.worldcommercereview.com expect moreexpect thanhalftheirworkforce to work regularly from thepandemic hasended. homeafter approach.a hybrid CIPDand working YouGov inMarch 2021stated that survey some40%ofemployers saidthey that isexpected whenlockdown endsemployeesIt willwant to work from homeandtheoffice therefore adopting The hybrid challenge thrive. return to afixed mindsetofbeingstuckintheir ways oflockdown inorder theaftermath but to to notonlysurvive to theenvironment andthemarket. The takeaway here isthat theymustcontinue to beagile andflexible andnot The lastyear hasdemonstrated that businesseshave becausetheyhadnochoice withagility inresponding acted leaner businessmodels. continuity was inplace andnow companies needto focus onhow to optimisetheirremote teams anddevelop seven years ofprogress inamatter ofmonths. They were to reacting thefirstlockdown, business ensuring &Company that businesseshaveA Mckinsey studyreported onaverage accelerated theirdigital offering with isolation to deliver greater benefits. ofadigital transformation theymustbepart strategy isvitalto acknowledge ratherIt thanimplemented in process andcanbedesigned andimplemented at speed. Businesses have discovered that digital transformation solutionsdonothave to bealengthy andcumbersome changesto thecustomer processes.making changes includingdeploying unification communication solutions to enableemployees to fromwork homeand thelastyearOver businesseshave beenpropelled by into lockdownand have action restrictions madetherelevant www.worldcommercereview.com and security. andcapabilities requiredcapacity for andotherareas hybrid to working ensure theyhave thedesired connectivity orderIn to successfully deliver thesebusinesseswillrequire arobust andreliant infrastructure to withstandthe such ascommunication, operations andcustomer service. seamlessly between homeandtheoffice. Technologyisalsoessential to transformexternal internal andprocesses Naturally, where ofhybrid technology employees iscrucial inthefacility working needto work andcommunicate The beating heart should beeveryone’s responsibility. the office. Within hybrid teamsthe communication willneed tobescheduledand effective team communication producing gaps, to effective knowledge barriers andisolating team memberswhoareteam notpresentworking in Communication willbe keyto itssuccess andwhennotmanaged well itwillresult inpoorinformation flow to managing theremotefor further workforce newmanagement skills over thelastyear. Businesses willbeconfronted withthechallengesof implementing and managing whichwillcall hybrid working whichbusinessesneedto bepreparedworking for. After thepandemic, that to 65%isexpected fall dramatically to 37%. This represents in asignificantways shift of offered it to 10%orlessoftheir workforce. mainly from home before thepandemic, 65%ofemployers eitherdidnotoffer from home regular at allor working According to data from of National Statistics, theOffice prior to only around 5% ofthe COVID-19 workforce worked www.worldcommercereview.com from anywhere usingapublicinternet connection. whichprovidesbusiness network anadditionallayer andenablesthemto access ofsecurity thecorporate network For employees remotely working we would advisearemote VPN to deliverthe connection asecure encrypted iscompromised. ifthesecurity alerted This could includefirewalls, authentications ormultifactor ontheuser’s singlesign-on device where theIT team are different locations that eachemployee isprotected by alayercyber attacks.to suppress ofsecurity hasbeenahottopic lockdown during andevenSecurity withcloudsolutionsitisvitalfor employees from working isparamountSecurity more abouttheemployees andthecustomers to addvalue andintelligence. Cloud solutionsalsodeliver analyticsondata usagewhichcanbeutilisedfor businessdecisionsandunderstanding when required. management ofcommunications, save costs andprovide theflexibility to addonnew technology andapplications movingBy to cloud-basedtelephony solutionbusinesseswillbeableto scaleupanddown, facilitate the Hosted inthecloud demands oflockdown recovery. look to migrating to IPsoonerrather thanlater to beprepared andto reap thebenefits to assistthemwiththenew been accelerated dueto thepandemicandcompanies that stillhave PBXtechnology on-premise should legacy issetfor in2025whenbusinesseswilltransition abigdigital fromThe shift ISDNto industry IP. The transition has IP alltheway www.worldcommercereview.com achieve to re-engineer your processachieve to enablingyou re-engineer to save costs, improve efficienciesandcustomer service. A solutionsprovider willwork closelywithyou to identify your problems areas andwhat you objectives want to phone callto £0.20usingAI. optionsviaweb chat orAIsolutionscandealwithcustomerservice enquires reducing from thecost to £4.00a serve optimising processes. Automation solutionscanbedesigned to handleamultitudeofdigital interactions, self- Businesses needto getcreative withAIandautomation technology to improve thecustomer experience by asonlineshoppingincreased dramaticallyseamless service andcompetition istougher thanever. The pandemic hasfast-tracked customers’ demandsincreasing expectations theneedfor apersonalisedand to competebusinesses expect oncustomer experience. Customer experience forecasts iswhat competition isdriving today orprice, notproduct that 89%of Gartner Improve withautomation communications, operational processes andcustomer experience. that itisintegrated to your front andbackoffice, suchas centre contact orCRM system todeliver improved communication solutionenablingemployees to communicate andcollaborate witheachotherensuring This implementing isastep aremote upfrom solutionto moving quickly working to acomprehensive unified collaborate wherever theyare. Businesses thenneedto lookat deploying aunified communications solutionsoemployees can communicate and unified Seamless communications www.worldcommercereview.com Jonathan Sharp at isaDirector Britannic Technologies stand still. ■ The COVID-19 pandemichastaught usto beagile andaccept changeandthat we needto keepmoving andnotto allifwefail after don’t fail thenhow we willevolve. ideas are welcome. Employers andemployees willoperate inatransparent environment where nooneisscared to We believe that businesseswillembrace whenlockdown lifts anewculture where creativity, innovation andshared reinvigorate, react andreinvent.” We mustremember asBillGates famouslystates, “Success today requires anddrive to theagility constantly rethink, A new world