Final rep ort
Executive Sum mary
ADE a nd Com pas s Lexe con ( th e Cons ort ium ) h ave been com miss ioned by th e Eur opean
Commission (EC) to provide support in th e combin ed retrospective ev alu ation an d
prospective im pact assessm ent stu dy of t he European Union (EU) Emission Tradin g
System (ETS) Stat e Aid Guid elines.
Thi s rep ort aim s t o p resen t o ur fin al r esult s o n t he e valu ati on wor kst ream as well as our
conclusions for th e impact assessm en t work stream. Th is report also pr esen ts the
app roach used durin g t he st udy to deriv e t hose concl usion s as well as t he li mit ations of
th e m ethods used.
The re port is str uctured in thr ee sect ions:
Sect ion 1 pr esent s t he policy con text and t he obj ectives of t he study.
Sect ion 2 pr esents the analysis and conclusions of t he evaluation
Sect ion 3 pr esent s the anal ysis and concl usion s of the im pact assessment
In Section 2, w e p resent our work t o suppor t the EC in it s e valuation of t he 20 12
Guide line s. Our analysis pr ov ides inputs in part icu lar t o the Sections 4 and 5 of th e
evaluation repor t pr epared by the EC. We provide deliverables in t he form of th ree
mem os: i) a literature review on carbon leakage risk; ii) an analysis of t he factors
explaining wh y Mem ber States did or did not im plement compen sat ion schem es; and
iii) a review of the pu blic consultati on r espon ses.
Our lit er atu re review su ggests that t o dat e there is no hard eviden ce of carbon
leak age caus ed b y t he EU ETS. This resu lt is con sist ent w ith th e f indi ngs of the lit era tu re
re view pe rfo rm ed by t he EC i n 2 015 and rel ies on a lim it ed set of s tud ies. Alt hou gh h ard
eviden ce cannot b e established, several f act or s ( e. g. the im pact of the low level of
carbon prices, poten tial over-allocation of emission allowances, the lack of a long
enough assessment period) still need to be consi dered b efore draw ing fina l con clusions
on carbon leakage. Also , t he f act t hat carbon lea kage did not happen in the past, when
carbon pr ices were relat ively low, does not mean that it will not happen in the future.
Therefore, fur th er rese arch on m ore recen t hist ori cal dat a cou ld chan ge t he conc lusio ns.
The review of the public consu lt ation resp on ses shows t hat most respondent s
acknow ledge the effectiveness of t he EU int ervent ion as w ell as the v alue added of th e
com pensat ion Guidelines, bu t a few crit icise some of t he characteristics of t he
Guidelines, e .g. th e list of e ligib le sect ors and th e lev el o f com pen sat ion received . Man y
respon dent s claim th at t here are examp les of carb on leakage, in par ticular in the f orm
of investm ent leakage and that higher com pensation lev els w ith no degressiv ity would
be required t o lim it th e risk of carbon leakage of the electro-intensiv e ind ust ries. Most
respon den ts point out t hat th e main risk of mark et distort ion is between the EU and
extra-EU countries, t heref ore the level of compensation should not be consider ed as a
risk for intra-EU market distort ion s. Most r espondent s, h owever, advocate a
har monisation of the com pen sat ion m echanism. Fin ally, the efficiency benchmarks or
degressivity principle are n ot perceived to be param eter s relevant to the incent ives t o
become m or e efficient as the sect ors argu e that investm en ts in en ergy efficiency
measu res w ould be made r egardless of th e com pensation receiv ed i n or der to main tain
th eir com pet itiven ess. Most responden ts argue t hat it is t he lack of com pensation or a
reduced compensation level that could prev ent the adoption of decarbonisation (via
electr ification) measur es.