Impact assessment workstream

AuthorFabien Roques - Helene Laroche
Com bined ret rosp ectiv e ev aluat ion and prosp ecti ve im pact asse ssmen t su ppor t st udy on Emission
Trad ing Syst em ( ETS) Stat e Aid Guidelin es
3. I m pact assessm ent w orkstream
In this section, we first presen t t he scope of wor k for t he im pact assessm ent. Second,
we det ail our conclusions on th e th ree ta sks cover ed i n t his wor kst ream : i) eli gibi lity ; ii)
aid int ensit y and degr essivit y, and iii) the em ission fact or.
The 41 Sect or Fiches and th e mem o on emission f actor ar e pr ov ided as separate
Annexes t o t his repor t.
3.1 Sco pe of w ork
Wit h t he work con du ct ed and t h e results outlined in this r ep or t , we aim t o pr esent
answers to th e fo llowi ng question s, set by EC:
What sectors face a significant risk of car bon leakage due t o the in direct
cost s of ETS?
For secto rs f acing such a r isk, to wha t ext ent can th is r isk be mit iga ted by
receiv ing financial com pensation from th e Stat e?
For sectors t hat could benefit fr om such compen sation, how m uch
com pensation would be needed to mitigate t he risk?
What competition disto rtions in the int er nal m ar ket can r esult from such
finan cial comp ensat ion?
In our analy sis w e assess four aspect s of the 201 2 Gui delin es:
1. the eligibilit y cr it eria, wh ich considers which sect or s identified as potent ially at
risk of indir ect carbon leakage should be elig ible for compen sat ion for indir ect
car bon cost s;
2. the aid intensity level, which considers th e lev el of com pensation to g iv e to
eligible sectors in or der to reduce th eir risk of carbon leakage t o a manageable
lev el;
3. the degr essivit y param et er to be ap plied t o the aid in tensit y during Phase IV;
4. t he emissi on f acto r t o be used in t he c alculat ion of t he aid am ount, rep resent ing
th e pass- through of car bon cost s into elect rici ty price s.
Several qu estions have been set by th e EC, w hich m anda ted t he Consort ium t o ad dress
th em as p ar t of the im pact assessm ent w or kstream list ed under Sect ion 4. 1 of th e
Technical Specif icati ons.
We have cond ucte d sect oral ana lyses pres ente d in th e f orm at of a Sect or Fich e fo r ea ch
of t he 4 1 sectors identified as p ot entially at r isk of indirect carbon leak ag e, p resen t ed
in Annex 1: List of sectors. We have answ ered the questions list ed by the EC for each
of t he sect or s wit hin the Sector Fiche by pr ov id ing analyses under four categories:
market charact er istics, p rofit m arg in s, abat ement potential an d fuel and elect r icity
substit utabilit y. To perform t he assessment of th e sect ors, we h av e relied on
in depen den t so urc es an d d evel oped a da tab ase u sing Eur osta t dat a ( all dat a u sed in t he
dat a base are pr esent ed i n Ann ex 12 : CL Eur ostat databa se).
Wit h our mem o on t he em ission factor, we assess t he calculat ion of t h e relev an t
emission fact or to be used in the calculat ion of t he aid am ount for th e revision of th e
20 12 Gu id elines.
In the section s below, we pr esent our analy sis on elig ib ilit y, aid am ount and
degressiv it y , as w ell as t he em issio n fa ctor .
Final rep ort
3.2 Eli gibilit y cr ite ria
In this su b-section , we pr esent our assessm ent r egard ing the eligi bilit y criteria.
Me th odology for eva lua tio n t h e e ligibilit y t hro ugh Sec tor Fich es
In order to assess t he eligibil ity crite ria, t he EC dev elop ed a list of qu estions to sup port
th e an alysis. We hav e an swered these quest ions for each sector thr ou gh the Sector
Fiches. They inc lude our in depe nden t r esearch as well as ou r d ata from t he CL Eur osta t
dat abase pr esent ed in An nex 12: CL Eu rost at dat abase. The EC q uest ions are:
1. Are t h er e part icular m ark et characterist ics of the sector put t ing it at risk of
car bon leakage due to i ndir ect ETS costs?
2. To what ex t ent are undertakings in t he sect or alread y passing or able to pass
higher en ergy cost s on to thei r custom ers?
3. Wh at ar e t he pro fit m ar gin s of EU u nde rt aki ngs in th e se cto r, as a p ote nt ial dri ver
for long-ru n in vest ment or rel ocation decisions?
4. To what extent is there a scope for energy efficiency investments in the sector?
Would t hese incentives be distor ted by gr anting com pensation for indirect ETS
cost s and if so, how?
5. To what extent are t he produ ct s of the sector su bstitut able with ot her pr oduct s
(int er-sector compet ition), the producers of which m ay be eligible for indirect
cost com pensation ?
6. How sig nifi cant is the risk of co mpeti tion dist ort ions in th e sector if not al l of th e
relev ant Member Sta tes were t o gr ant com pensati on for indir ect cost s or if they
do so t o a dif ferent degr ee?
7. To what extend do undertaking s in t he sect or dif fer as regards their sh ar e of
dir ect versus indir ect emission s in t heir p rodu ction processes? In part icular: ar e
under takings in t he sector using differen t production t echnologies w hich lead to
a situation where som e undertakings face a higher sh ar e of indirect ETS costs
(e lectr ification of prod uction processes) compar ed w ith direct ETS cost s?
8. Base d o n t he in for ma ti on gat her ed, please in dica te, es pecia lly fr om t he que sti ons
abo ve, which sectors are most exposed to car bon leaka ge?
Sect or Fiche p resen tat ion
The app roac h p ropo sed by the EC is to per for m the im pact as sessm ent of th e u nder lyi ng
par ameter s (elig ibilit y, aid intensi ty, and degr essivit y) on a sector-by-sect or basis.
For each sector , w e pr oduced a Sect or Fich e th at: i) assesses t he r isk of i ndir ect carbon
lea kage usi ng a Red Am ber Gree n ( RAG) assessm en t1 6, and ii ) d ete rm ines t he a dequ ate
maxim um aid am oun t for this sector . We have also considered if t here was enough
evidence to plead for a degr essivity principle in the Guidelin es. The eligibilit y cr it eria
and aid amount are ex pected to balance th e EU obj ectives of m in im isin g the r isk of
car bon leakage and of com peti tion distortion s within the EU, as w ell as m aint aining t he
incenti ves f or b usinesses to reduce th eir indirect em issio ns.
16 I n the RAG assessm ent, Red in dicat es a hig h risk of carbon leakage d ue t o indir ect
carbon cost s, Amber - Red a m edium-high r isk , Am ber a m edium r isk , w hilst Green
indicat es a low ri sk of car bon leaka ge an d Gr een-Am ber represents a lo w-medi um risk .
Com bined ret rosp ectiv e ev aluat ion and prosp ecti ve im pact asse ssmen t su ppor t st udy on Emission
Trad ing Syst em ( ETS) Stat e Aid Guidelin es
For each Sect or Fiche, we h av e analysed the data provided by sect ors thr ough the
targ et ed consultation17 w hich w e have cr oss-checked w ith ou r Eurostat dat ab ase. The
list of r esp onses received fr om sectors is provided in Annex 13: Responses received
from sect ors. We have also con du ct ed independent research using publicly available
sources as w ell as interv iews w it h cert ain sect ors to cr it ically assess their statem en t s
regar ding th eir eligibilit y and level of com pensation required. For each int er view with
th e sect ors cont acted, a repr esent ati ve of the Comm ission wa s presen t.
We have first assessed the data p rovided by t he sectors, ev aluating t he robust ness of
th e dat a by checking data sou rces ( e.g. official sources lik e Eur ostat are deem ed to be
of high quality) , t h en t he represen t at iveness of the data in t er m s of sector coverage
and geograph ical scop e. Fin ally, we checked th e per iods cover ed b y t he dat a to ensu re
th at it can be used for th e im pact asse ssmen t of t he fut ure ETS Guid elin es fo r Phase I V.
For each of the 41 sectors identified by t he EC, we have prepared a specif ic Sect or Fiche
th at fir st assesses the r isk of carb on leak age f aced by t he sector and t herefore m akes
it el igi ble to r eceiv e a com p ensat io n f or ind ire ct cost s an d secon d, assesse s the ade qua te
lev el of aid t hat the secto r sh ould r eceiv e.
To assess t he sect or ’s risk of car bon leakage st emming from indir ect ETS cost s, and
th er ef or e the eligibility of t h e sect or, we have analysed t he risk of th e sect or by f our
cat egories, for which we assess a num ber of par ameters:
Ma rk et cha racteri stics: in th is category we assess the ex tent t o which
producers can pass on cost incr eases to cust omer s, and in part icular the
ability to p ass on higher elect ricity cost s. We also refer to ex isting and
future tradin g patterns, assessing param et ers such as t he bar gaining
posit ion of t he sect or, the p rice taker posit ion, and tradin g pa tte rns.
Prof it m a rgins: in th is cat egor y w e assess t he current and futu re
profit ability of th e sect or in the EU ETS ar ea. Under t his cat eg or y, we
assess par am et ers such as cur ren t and fu tu re dem and , o ut put p rice , c osts ,
investm ent, business demography of t he sector and su bstitut ab ilit y wit h
ot her pr oduc ts. We also consi der th e fe asibi lit y o f r eloca tio n f or the sect or.
Abat e m e nt p ot e ntia l: in t h is category we assess th e scope for en er gy
eff iciency inv est m ent s in ord er to r educe electricit y consum ption in t he
sect or . Under this category , w e assess parameters such as current
electricit y consumpt ion, int ernation al benchm arks and cur rent and fut ure
ado ptio n of Best Avai lable Techn ologi es (BAT) .
Fuel a n d ele ct r icit y sub st itut a bilit y: in t his cat egory we assess t he
ability of t he sect or to shift fr om fossil fu el ener gies t o elect ricity an d
evalu ate if t her e is a r isk tha t di ffer ences in t reatm ent bet ween dir ect and
indir ect cost com pensation m ay h inder the ener gy-efficient el ectr ifica tion
of t he se ctor .
For each sector, we have ana lysed w hether t he evidence r egardin g t he fut ure adop tion
of BAT t hat allows the sector t o reduce it s electricit y consum ption in the fut ure is
suf ficien t t o plead for a d egressiv ity pri nciple i n t he Guidelin es.
17 From 13 Febru ary 201 9 to 9 April 2 019, the Comm ission ran a t argeted consult ation
to gat her informat ion enablin g for t he d et er m in at ion of t he sect or s exposed t o car bon
leakage risk due t o indirect em ission costs. The q uestionnair e is pu blish ed on the DG
Competition’s con sultat ion website:
ht tps: // compet it ion/con sultat ions/ 2019_ et s_guidelines/ in dex_ en.h tml

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