The world’s first AI Act has set a global benchmark for AI regulation. This is happening in parallel to Europe grappling with slow growth, expensive energy prices and a desire to decarbonise, writes Olaf van Haperen, Senior Technology Partner and Lead of European TMT, Eversheds Sutherland.

Favoured for its ability to modernise grids and make our energy smarter, AI offers huge potential for decarbonisation. At the same time, we can’t shy away from the vast energy consumption required to power and cool this next generation solution. How to unleash it’s potential while safeguarding citizens, economies and democratic values is the challenge for policymakers to grapple with.

Europe is no stranger to this dilemma. Mario Draghi’s recent EU competitiveness report highlights the challenges and opportunities well: “with the world on the cusp of an AI revolution, Europe cannot afford to remain anchored in the “middle technologies and industries of the previous century.” This report talks extensively about the importance of reducing energy costs to put Europe back on the path to prosperity. These issues aren’t mutually exclusive. In fact, finding a way to innovative extensively in a protected way on AI might just solve both challenges.

Risk or reward – where to tip the scales?

It’s no surprise the EU is one of the leaders in AI regulation. It follows the continent’s longstanding tendency to place ethics and human rights at the centre of policymaking. But to stay competitive in a rapidly evolving landscape, regulation doesn’t just require restriction, policies can also focus on rewards and incentives. This could include things like targeted investment and streamlined pathways to scale digital grid solutions. Principles can set the direction, but incentives will power the journey.

The AI Act itself, when paired with practical support mechanisms such as regulatory sandboxes, certification schemes, and knowledge centres, can create a safe environment for experimentation and growth.

Looking ahead, it’s not just the AI Act that is on the EU’s policy agenda. The Digital Omnibus will, if adopted in its present form, streamline the EU’s digital regulatory landscape and provide clearer rules for responsibility, reducing uncertainty for innovators, while the Data Act will open up new opportunities for data-driven business models. This also comes at a time where the EU Omnibus package is looking to detangle energy regulation in the region.

Understanding and navigating these regulations is complex. And for many promising research initiatives the decision is to relocate abroad, leaving Europe reliant on imported technologies rather than leading the field. This has happened in solar technology, where nearer to 95% of solar panels are now imported from a single country. Cheap, imported technology on an area where Europe once led the way is a reminder of the importance of balancing innovation and regulation in areas beyond AI, which is the current frontier for this debate. The opposite risk is equally real where innovation moves faster than regulation can keep up. We’ve already seen in the US a huge number of lawsuits where litigation looks set to fill the legislative gap.

Future proof legislation

Well-designed regulation can offer clarity and confidence, providing a trusted framework for growth – as we’ve seen with long-term policies in the net zero space. Businesses have a crucial role to play here: by engaging early with policymakers, participating in pilot programmes, and leveraging available incentives, they can help shape future frameworks to their advantage. By viewing regulation as a partnership rather than a hurdle, organisations can gain first-mover advantage, influence emerging standards, and build lasting trust with customers and stakeholders.

Navigating this landscape alone can be complex, which is why partnering with experienced legal advisers is becoming essential. Law firms can help organisations interpret evolving legislation, anticipate forthcoming obligations, and design compliance strategies that support innovation rather than stifle it. Strategic legal guidance can also help companies make the most of the transitional compliance period by testing modular commitments to the GPAI Code, identifying potential risks early, and ensuring they are well positioned when enforcement begins.

Values led success

As Europe leans on AI to support its decarbonisation plans, principle led regulations can drive real progress. As we’ve seen many times before, pairing long-term visionary plans with bold incentives will be key to make sure Europe can capitalise on the AI revolution and support citizens, businesses and the environment in the process.

For more information: https://www.eversheds-sutherland.com/en/united-kingdom

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