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Speaker 1: Hi everyone. During the initial stages of the COVID nineteen pandemic,

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Speaker 1: the European Commission stayed relatively quiet, leaving the initial response

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Speaker 1: to the member states and distributing emergency funds via the

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Speaker 1: European Central Bank. But on the European Commission broke its

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Speaker 1: silence and announced a plan for economic recovery and its

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Speaker 1: next long term budget. Most notably, it proposed an eye

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Speaker 1: watering one point eight five trillion euros in stimulus spending

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Speaker 1: over the next seven years, which must go to things

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Speaker 1: classified as quote green. Notable parts of the propost spending

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Speaker 1: include building renovations to improve efficiency, a massive rollout on

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Speaker 1: electric vehicle charging infrastructure, and enough spending on hydrogen to

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Speaker 1: make it competitive a lot sooner than it would be otherwise.

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Speaker 1: But of course, what does green actually mean? And how

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Speaker 1: are all these buildings gonna get renovated? Have we decided

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Speaker 1: which type of ev charging is going to be the standard?

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Speaker 1: Is there a skilled workforce ready to go on hydrogen?

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Speaker 1: If these questions, and I'm sure several several others can

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Speaker 1: get answered, it'll put this mountain of cash to use,

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Speaker 1: and it could also help proliferate green investment in new

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Speaker 1: industries globally. This weekend the show, we've got Dario Troum,

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Speaker 1: energy transition analyst for BNF here to tell us about

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Speaker 1: the announcement and what it will take for this money

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Speaker 1: to get spent. Our discussion is based on report he wrote,

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Speaker 1: How Green is the EU's trillion euro recovery plan. We

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Speaker 1: did this one a few weeks ago, but we've done

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Speaker 1: several more since then. Deep dives on buildings, hydrogen evs,

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Speaker 1: and charging networks as written up in the plan being IF.

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Speaker 1: Users can get these reports on BNF dot com, to

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Speaker 1: be NF mobile app, and the Boomberg terminal. As a reminder,

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Speaker 1: BENIF does not provide investment or strategy advice. You can

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Speaker 1: hear the full dist claimer at the end of the show.

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Speaker 1: I'm Mark Taylor, You'redanna Perkins, and you're listening to switch

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Speaker 1: on the BENF podcast. Hi Dario, Welcome to the show.

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Speaker 1: Hi nice to be here. So we're here today and

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Speaker 1: we're going to be talking about the EU stimulus and

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Speaker 1: you've got some views on that. So this just came

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Speaker 1: out recently, did it not? Absolutely? Yeah, the Commission's kind

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Speaker 1: of switched gear after spending a lot of time with

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Speaker 1: number of states and the European Central Bank focusing on

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Speaker 1: emergency liquidity provision, so you know, how do you avoid

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Speaker 1: a run on banks and and companies struggling with the

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Speaker 1: debt in times of crisis to actually focusing on the recovery.

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Speaker 1: So this announcement was sort of the big landmark the

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Speaker 1: EU coming together putting forward a substantial amount of money

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Speaker 1: or proposing a substantial amount of money to get us

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Speaker 1: out of this crisis once the public health part has

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Speaker 1: been taken care of, or even before considering that this

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Speaker 1: COVID nineteen pandemic is still ongoing. Let's outline it a bit.

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Speaker 1: So how much are we talking about here and what

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Speaker 1: is this stimulus money going to? So there's two parts.

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Speaker 1: The one thing that's you know, really additive and is

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Speaker 1: being proposed as as a new tool on on May

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Speaker 1: twenty seven, few weeks ago, is the next generation EU.

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Speaker 1: Have they quickly named a stimulus package for NEXTRA seven

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Speaker 1: fifty billion euros of money that is specifically for COVID

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Speaker 1: nineteen recovery. But um, you didn't just focus on on

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Speaker 1: announcing this one off budget, but it's sort of folded

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Speaker 1: it in. It's multi annual budget negotiations, so every seven

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Speaker 1: years UM that you need to get its budget approved

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Speaker 1: by all the member states, and that's obviously a difficult discussion,

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Speaker 1: in particular when you have the UK, one of the

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Speaker 1: biggest contributors leaving and so what do you UH is

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Speaker 1: attempting to do here is seizing the moment of this

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Speaker 1: COVID nineteen crisis and the importance to develop a response

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Speaker 1: to push through a seven dred billion extra support. So

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Speaker 1: if you put that together, it's a one point eight

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Speaker 1: five trillion euros m. That's a lot of money. And

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Speaker 1: the one overarching criteria which is making it particularly interesting

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Speaker 1: for the energy transition is that for the first time

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Speaker 1: or more of all of this money has to go

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Speaker 1: to explicitly green investments. How do they determine what is

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Speaker 1: considered to be green? So I mean certain things are

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Speaker 1: quite evidently green, So you know, solo project in with projects. Actually,

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Speaker 1: one of the things that's been happening in the EU

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Speaker 1: and in Bloomberg in general is very involved in is

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Speaker 1: UM the taxonomy. So the taxonomy is a process through

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Speaker 1: which essentially review all sorts of assets classes, whether they

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Speaker 1: are physical assets or even managed assets. And you determine

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Speaker 1: whether or not they're green, brown, or some shade of

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Speaker 1: the two in between. So there's some assets that are

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Speaker 1: labeled as a transition assets in the process of becoming green,

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Speaker 1: and that's actually turns out, you know, it's going to

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Speaker 1: become a really useful tool to help the EU SS

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Speaker 1: with and investors in general and portfolio holders what investments

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Speaker 1: counters green. The hydrogen is one, for example, where you

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Speaker 1: need to be doing quite a bit more work to

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Speaker 1: see whether it's really green hydrogen or blue hydrogen or

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Speaker 1: offers a few hyrogen They are clearly their monies to

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Speaker 1: be done. Do you feel like the EU is doing

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Speaker 1: this to kind of spite the UK for leading? You know,

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Speaker 1: the EU is getting some criticism for their response to

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Speaker 1: COVID nineteen. Uh, their their lack of concentrated response, I

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Speaker 1: guess on it, And now they're all coming together with

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Speaker 1: more money, even with their main contributing member out. Do

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Speaker 1: you think it's an active spite So, I don't think

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Speaker 1: it's it's spite. I think it definitely it should cause

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Speaker 1: some reasons for reflection in the UK because there's a

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Speaker 1: picture of the EU that was particularly problematic to too

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Speaker 1: many people across the Union's first, you know, a bureaucratic

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Speaker 1: establishment that is out of death touched with member states.

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Speaker 1: That's probably the criticism that was unfair towards the people

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Speaker 1: in Bussels. But the otherwise that you as an integration

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Speaker 1: mechanism which essentially only focused on adding new countries, granting

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Speaker 1: those countries a certain access to the market, but also

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Speaker 1: to a free movement of labor, and then every year

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Speaker 1: organizing budget transfers from the most developed, which is oldest

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Speaker 1: members towards the newest was sort of an equation that

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Speaker 1: people weren't so happy with anymore. Now what happened with

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Speaker 1: COVID is, you know, unfortunately the crisis hit in two

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Speaker 1: countries that were very hit, but the previous financial crisis

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Speaker 1: as well, Italy in Spain. But this time one cannot

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Speaker 1: blame it on mismanagement of financial sector or public budgets,

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Speaker 1: and so there's a real rethinking around. You know, these

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Speaker 1: new funds, how do we distribute them? Clearly, we want

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Speaker 1: to distribute them to aid the economies that were most

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Speaker 1: hit by the COVID nighteing crisis, but also those that

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Speaker 1: are in the worst position to deal with the economic

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Speaker 1: downturn that that follows it. And you know, this shows

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Speaker 1: that the you is not a one way street, but

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Speaker 1: the cards can be reshuffered when it's needed. And and

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Speaker 1: so in the proposal of the Commission, which certainly are

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Speaker 1: still on the negotiation around really, how do you define

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Speaker 1: the criterias of who gets how much money? Uh? Spain, Italy,

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Speaker 1: but even France UH and then Poland are among the

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Speaker 1: countries are set to receive the most. Whilst you know, Germany,

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Speaker 1: the obvious country that on one hand dealt very well

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Speaker 1: with the with the public health crisis which was less

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Speaker 1: aggressive in the country, but also the one that's been

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Speaker 1: sitting on the most sound public budget of the large

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Speaker 1: countries in the EU, is sort of ready to redistribute.

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Speaker 1: And maybe just one one more thing on that to

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Speaker 1: show how important it is. Germany alone has done more

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Speaker 1: than half of all of the emergency liquidity and recovery

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Speaker 1: spending in the EU so far for twenty seven countries.

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Speaker 1: So that just shows you how, you know the imbalances

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Speaker 1: that you feels it needs to correct to avoid the

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Speaker 1: youth from fragmenting. That is that that that's a lot

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Speaker 1: of dynamics. There's clearly a lot of complexity around which

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Speaker 1: countries need to benefit from the money in the stimulus package.

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Speaker 1: But then there are going to be specific industries that

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Speaker 1: I assume that they want to see grow. So if

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Speaker 1: you could talk a little bit about which in austries

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Speaker 1: are most likely to benefit and maybe where they are

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Speaker 1: in their development, because some of these industries are less

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Speaker 1: mature than others in terms of technology and price competitiveness. Yes,

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Speaker 1: so in recent year, is the US refined its state

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Speaker 1: aid mechanism because it's an internal market where everybody is

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Speaker 1: supposed to play on a living playing field, and given

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Speaker 1: that they you have been too ambitious on climate, the

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Speaker 1: rules tend to favor already green or cleaner industries. And

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Speaker 1: so what's quite interesting now when this recovery package was

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Speaker 1: put together is that a lot of the rules and

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Speaker 1: infrastructure needed to ensure that the money flows to cleaner

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Speaker 1: assets is actually already in place now. As often when

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Speaker 1: one tries to accelerate the timeline, what's clear is we've

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Speaker 1: got a lot of money being announced and in some

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Speaker 1: new sectors being the buzzwords of the recovery package, where

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Speaker 1: we'll still need to see how do you deploy this

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Speaker 1: money efficient So on one hand, we've had hydrogen UM

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Speaker 1: where hydrogen strategy was due or issue in in the

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Speaker 1: coming weeks for the youth for the first time. But

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Speaker 1: clearly this recovery announcement jumps a gun a bit on

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Speaker 1: that and seems to say that hydrogen is set to

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Speaker 1: benefit quite a bit. Now, what all the rules, with

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Speaker 1: all the regulations of a hydrogen economy, how do you

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Speaker 1: ensure that the sector coupling works being next just published

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Speaker 1: a very big report on the issue. Clearly it's it's

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Speaker 1: still work in progress to do for this money to

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Speaker 1: flow efficiency. Similarly, on charging infrastructure, you know the business

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Speaker 1: models and their approach to incentivize and set up all

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Speaker 1: these charges. I told farenwere to have lofty goals, but

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Speaker 1: you need to see sort of you know, who is

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Speaker 1: going to put these these charges in the ground. Um.

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Speaker 1: Another example is energy efficiency, which in the leaked UM

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Speaker 1: information we've had on the stimulus measure by far worth

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Speaker 1: receiving the the most capitals spent. It's notoriously difficult projects

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Speaker 1: to ensure that investors. That means remodeling buildings right exactly

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Speaker 1: in terms of energy efficiency. Yeah, you know, because the

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Speaker 1: confinement obviously UM, the inequalities of where people were confined

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Speaker 1: and put them into light. I think everyone agreed that

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Speaker 1: it was it was time to really increase the pace

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Speaker 1: of energy efficiency and building retrofits in you plants, but

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Speaker 1: also at Members States ever, so all over Europe you're

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Speaker 1: you're hearing in in the early discussions around similar energy

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Speaker 1: efficiency in which we fits are really going to be

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Speaker 1: at the top. But one of the reasons they haven't

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Speaker 1: been doing as well as we wanted um so far

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Speaker 1: is tied to the fact that there's a lot of

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Speaker 1: clarity on incentives but use how do you do in

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Speaker 1: buildings where it's a landlord to the benefit of tenants?

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Speaker 1: How do you get things to to be replicable? So

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Speaker 1: a lot of things to figure out, But do you

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Speaker 1: want to announced a strategy in September the renovation with

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Speaker 1: so this money is meant to be deployed over the

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Speaker 1: course of the next seven years. Yeah, the seven fifty

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Speaker 1: billion temporary reinforcement as they call it. There there is

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Speaker 1: some discussion over how long it needs to be spent,

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Speaker 1: but it's typically going to be two too sweeyears. So

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Speaker 1: some of the more thrifty Member states, Denmark and Company

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Speaker 1: would like it would be more limited in time, so

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Speaker 1: maximum two years investment, spending some even just until the

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Speaker 1: end of this year. Whilst the Commission I think also

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Speaker 1: acknowledging what we just discussed that deploying that cash is

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Speaker 1: not going to be that easy in certain sectors. I

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Speaker 1: would like the money to be spread over a longer period,

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Speaker 1: and it's that specifically tied to green stimulus in this regard.

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Speaker 1: This is all with the mind to reaching that zero

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Speaker 1: by how close real aligned do you think each of

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Speaker 1: the decisions along the way will be in making sure

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Speaker 1: that is the year is obviously the you know, the

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Speaker 1: eye catching net zero goal, but actually the one that

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Speaker 1: is a bigger issue or a bigger challenges in the

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Speaker 1: near term that you would like to increase its emissions

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Speaker 1: production from levels to We also have to remember that

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Speaker 1: that EU budget combines with national level efforts, so you know,

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Speaker 1: Germany is still spending over twillion euros a year on

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Speaker 1: its renewable energy subsidies. It's announced its own recovery plan,

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Speaker 1: frances is going to announce its own recovery plan in

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Speaker 1: September so and so forth, so you know, it's it's

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Speaker 1: definitely meaningful and and helping us build things in favor

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Speaker 1: of of meeting It just seems like we're going to

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Speaker 1: have to get very creative in terms of the scope

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Speaker 1: of projects that the EU is looking at in order

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Speaker 1: to meet what are arguably pretty ambitious goals. And I

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Speaker 1: know that ultimately you have to get there right that

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Speaker 1: the stakes are very high. But in addition to hydrogen,

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Speaker 1: in addition to massive rollout of charging infrastructure, do you

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Speaker 1: anticipate that there will be other things that pop up

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Speaker 1: that they will be willing to try and maybe be

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Speaker 1: a little bit less safe with the money and trying

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Speaker 1: and investing in things that could potentially be a black swan. Well, actually,

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Speaker 1: I would say in this case, you know, hydrogen is

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Speaker 1: the black swan and uh and what matter is actually

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Speaker 1: a bit more is you know, the people that are

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Speaker 1: affected by these crisis need to see the result within

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Speaker 1: the next two years and not in hydrogen economy all

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Speaker 1: fair and well has a lot of potential. We need

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Speaker 1: to press forward, but we can't put all our eggs

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Speaker 1: in that basket. And so in the in the meantime,

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Speaker 1: you need to focus on things you can do right away.

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Speaker 1: And we mentioned hydrogen, we mentioned charging infrastructure. All of

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Speaker 1: these things depend on us being able to increase the

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Speaker 1: amount of clean electricity we're producing. And right now you

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Speaker 1: have auction results in Germany where projects cannot participate because

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Speaker 1: they're not securing permits, so they're challenged in courts. The

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Speaker 1: same thing is happening in Italy, the same thing is

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Speaker 1: happening in France. Much of Central and Eastern Europe is

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Speaker 1: not yet sort of hadn't yet fully finalized the policies

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Speaker 1: they need and gather the public support they need to

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Speaker 1: roll out much more wind solar projects to to to

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Speaker 1: increase our tam power. So the governments need to to

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Speaker 1: remove some of the red tapes that you get more

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Speaker 1: shovel ready project as as one likes to call it

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Speaker 1: in the stimulus Strabon. I like that phrase. Actually shove

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Speaker 1: already is great. Let's project out and let's think about

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Speaker 1: this in terms of like how feasible is it to

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Speaker 1: remove this red tape because the European Union is full

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Speaker 1: of a lot of independent countries and one of the

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Speaker 1: things that we saw with COVID was kind of this

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Speaker 1: pull back to individual borders. If we're taking its clean

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Speaker 1: transition seriously, um, there's two things that we really need

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Speaker 1: to focus on that we haven't been doing so far

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Speaker 1: is one, you know, how do you help um existing

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Speaker 1: legacy capacity offline? And you managed to impact that has

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Speaker 1: on the falihood of two communities tied to it, so

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Speaker 1: thinking about calling gas in particular called top power plants

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Speaker 1: that need to come offline over the next ten years.

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Speaker 1: And the other is how do you ease and increase

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Speaker 1: the acceptance of the new projects that you need to

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Speaker 1: replace those assets. And there we're seeing, you know, unfortunately

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Speaker 1: the money talks and and one of the things that

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Speaker 1: working well in Frances that you increase the level of

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Speaker 1: tax revenue that uh the power plants, the solar and

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Speaker 1: wind power plants generates for the local community, you allow

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Speaker 1: that community to participate with equity in the project. And

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Speaker 1: certainly when we're going to be building you know, bigger projects.

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Speaker 1: So far Europe has been such a victim to have

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Speaker 1: because of all these Ratape has been tended to build

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Speaker 1: quite small projects. When we're going to big build A

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Speaker 1: one or hydrogen infrastructure, certainly some communities will have to

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Speaker 1: receive some funding to compensate them for that. But Darius,

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Speaker 1: it seems the biggest theme I'm hearing is that there's

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Speaker 1: a lot of challenges before they can actually deploy any

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Speaker 1: cash at all. My other question is there's a lot

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Speaker 1: of things that need to be cited, you know, in

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Speaker 1: the charging infrastructure, in the the hydrogen infrastructure, that before

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Speaker 1: companies can even start to do anything right, So is

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Speaker 1: the bottleneck actually just deploying the cash. Yes, I think,

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Speaker 1: you know, its going to be really important to show

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Speaker 1: that this money is has you know, delivers results, um

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Speaker 1: that the account for for the people that need the

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Speaker 1: most helping in the short term and definitely. But I

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Speaker 1: guess what I'm saying is that that I haven't heard

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Speaker 1: any examples yet where it's going to be simple just

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Speaker 1: to give the money out and see see a result quickly.

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Speaker 1: Is that true or not? I mean, one thing we

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Speaker 1: have to remember is the European Union collectively has been

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Speaker 1: really been building experiences around how to deploy money to

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Speaker 1: clean investment. European Investment Bank, it's the largest public bank

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Speaker 1: in the world, supports in clean energy primarily now. In fact,

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Speaker 1: it's it's completely excited for so few investments and there

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Speaker 1: of course have already fun facilities mechanisms that have allowed

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Speaker 1: money to flow to energy efficiency projects, clean energy projects,

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Speaker 1: charging infrastructure, rollout good infrastructure. So you know, the role

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Speaker 1: of that entity, and that's been in the bags for

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Speaker 1: for quite a wild way before the recovery plans we

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Speaker 1: discussed is going to increase. And so what you have

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Speaker 1: to expect is that a lot of the existing mechanisms

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Speaker 1: are going to be enhanced and so perhaps actually the

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Speaker 1: you know, the way is already there. We're just going

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Speaker 1: to notice it a lot more because the volume of

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Speaker 1: money going through that way it's going to increase. The

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Speaker 1: other thing is just transitions funding. I think that's one

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Speaker 1: thing that's important to mention, and that is quite new.

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Speaker 1: It's been quadrupled to forty billion from less in ten

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Speaker 1: in this latest announcement, and there it's definitely going to

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Speaker 1: be challenging to decide who deserves just transition funding the

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Speaker 1: most because you're essentially trying to give people money for

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Speaker 1: closing coal assets, and you know, does it go to

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Speaker 1: the asset owner, does it go to the community that's impacted,

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Speaker 1: what projects are useful to that community. You're probably not

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Speaker 1: just going to give hand outs. You have to show

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Speaker 1: them that there is a way after call and that,

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Speaker 1: you know, I think it's definitely a complex and very

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Speaker 1: human discussion, which I'm sure the Commission is going to

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Speaker 1: attract critically and regardless of the solution it takes to

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Speaker 1: to deploy that money, But it's also very important one

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Speaker 1: because so as far as I know today, we we've

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Speaker 1: never had really the opportunity to anticipate the disappearance of

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Speaker 1: certain sectors and try to to manage that social and

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Speaker 1: economic impact for the communities that are affected. Is the

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Speaker 1: Just Transition funding specifically for projects that would lead to

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Speaker 1: an outcome? Or is just transition part of the consideration

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Speaker 1: of all of the money that's being deployed and is

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Speaker 1: one thing that's kind of weighing in to the process.

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Speaker 1: So definitely a bit of both. So just transition is

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Speaker 1: a theme that runs through the announcement, But the Just

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Speaker 1: Transition Fund specifically, you know, the only countries that were

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Speaker 1: qualify will be those that are suffering a serious dessileration

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Speaker 1: of certain sectors. CODE is going to be the number

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Speaker 1: one on that list in the coming years. But then

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Speaker 1: they also be some for for the steel industry and

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Speaker 1: other sectors that have been competitively blows switches from the

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Speaker 1: tree transition in recent years. So quite a big menu,

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Speaker 1: but new territory. That's that's exciting, and that I think

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Speaker 1: it's going to play an important part in UM helping

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Speaker 1: us commit to the higher goal in Well, I'm glad

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Speaker 1: you specifically brought up coal as a part of the

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Speaker 1: just transition focus. But are there other things, other aspects

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Speaker 1: of this that you maybe would like to see other

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Speaker 1: parts of the world learn from. I think, you know,

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Speaker 1: we've got the U where obviously everything will be depending

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Speaker 1: the the election results. UM. It's good to see that,

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Speaker 1: you know. Nonetheless, Mr Trump is trying to put the

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Speaker 1: infrastructure spending that he had on the table on the

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Speaker 1: as part of the recovery discussion, so that that would

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Speaker 1: still be beneficial to the US. In China, it's a

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Speaker 1: slightly different discussion. Reviewables are incredibly cheap and competitive, and

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Speaker 1: it's sort of an industry that's been caught in a

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Speaker 1: storm of over public insensialization. So a lot more expert

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Speaker 1: has been put on on other new sectors which could

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Speaker 1: be beneficial to the climate transition, so increased the digitialization,

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Speaker 1: faster broadband, and also electricity transmission infrastructure and things like that.

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Speaker 1: One of the things that's interesting is this crisis is

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Speaker 1: happening um and closing quite as quite a big confidence

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Speaker 1: shock for for emerging economy. So typically when the world

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Speaker 1: is going through a crisis, everybody prefers to put the

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Speaker 1: money and safe havens, and this is happening at a

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Speaker 1: time where actually a lot of emerging markets were growing fast.

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Speaker 1: We're taking on that to fund more public spending and

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Speaker 1: you know, deploy more infrastructure for for for example, in

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Speaker 1: in the freed energy industry, and a lot of these

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Speaker 1: countries now are going to be needing more support from

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Speaker 1: the global community, from countries but also in particular from

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Speaker 1: the I m F and the World Bank. So we're

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Speaker 1: seeing countries like South Africa, Indonesia, Vietnamsa are really really

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Speaker 1: central to global climate ambition efforts prepare were consider a

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Speaker 1: faster transition um towards the economy. You're talking about the

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Speaker 1: definitions of a green project and how those could come

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Speaker 1: back to corporates and investors in terms of better defining

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Speaker 1: what a green investment is, a green bond or a

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Speaker 1: green project that could go into a green bond, etcetera, etcetera.

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Speaker 1: Do you think the EU stimulus package will help define

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Speaker 1: terms for indust tree that will be carried out, you know, globally. Yeah,

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Speaker 1: I think it's definitely you know, increasing the urgency of

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Speaker 1: anyone who wants to get something funded by this stimulus

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Speaker 1: money now is is raising to get the credentials it

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Speaker 1: needs to In the ideal world, that means that your

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Speaker 1: regulation is ready, in time, perfect. The taxonomy gets rolled

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Speaker 1: out in every possible option on the table is labeled

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Speaker 1: as green, brown, or shade of boats. But what's also

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Speaker 1: happening is that a lot of companies are doing virtue

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Speaker 1: signaling now. So um, you know, I think the fact

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Speaker 1: that European oil and gas majors all confirmed that they

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Speaker 1: were going to strive towards net zero by twenty fifty

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Speaker 1: at least in their European operations, and that they were

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Speaker 1: committed to join the electrification trend and build clean energy.

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Speaker 1: That's clearly them put the positioning themselves to to benefit

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Speaker 1: or contribute I guess both to to this green recovery.

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Speaker 1: So I think, you know, it will be really a

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Speaker 1: too two part process. Is what the industry comes up

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Speaker 1: with to financial sector is full of labels and credit

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Speaker 1: rating agencies that are already qualifying things as green, that

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Speaker 1: are that we're working with on a day to day basis,

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Speaker 1: but also the EU now being under pressure to finalize

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Speaker 1: the tools it needs to make sure that the money

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Speaker 1: floats to green in a in a transparent way um

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Speaker 1: and and that things are not wasted or green washed. Dario,

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Speaker 1: thanks for joining us, Thanks a lot. Bloomberginny F is

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Speaker 1: an investment or other strategy. BLOOMBERGUINNA should not be considered

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Speaker 1: as information sufficient upon which to base an investment decision.

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