Abstract
This report supports the European Commission’s revision of the EEAG and section 7 of the GBER. It consists of 3 study items that address distinct questions:
Study Item 1: The measurement of cost-effectiveness (EUR per tonne of CO2 avoided) allows for the assessment of relative decarbonisation benefits of policies, but may not always capture their overall environmental impact. Wind, solar and energy efficiency have similar cost-effectiveness, while cogeneration of heat and power is less cost effective. Focusing on decarbonisation objectives only, multi-technology auctions improve cost-effectiveness by prioritising less costly technologies. If potential inframarginal rents and dynamic effects are also considered, then technology specific auctions may exhibit lower carbon mitigation costs in some cases.
Study Item 2: Research on operating and investment aid is reviewed, with the finding that for environmentally friendly energy aid, some distortions have arisen from the nature of aid, but that both investment and especially operating aid can yield positive outcomes.
Analysis of four actual schemes with operating or investment aid suggests that precise scheme design matters for success and often evolves with time. Three aid schemes are examined for industrial decarbonisation. Aid levels of 40% for fixed aid intensity are deemed unlikely, if the maximum aid intensities remain unchanged, to provide sufficient support for several industrial decarbonisation routes.
Study Item 3: Empirical studies support the relevance of electro-intensity and trade intensity for eligibility of energy-intensive users for levy exemptions in the EEAG. The analysis of levies from 2011 to 2018 highlights their large heterogeneity across sectors, countries and over time. Scenarios harmonising levies to the highest levy and abolishing exemptions lead to a substantial decrease in profits. A limited profit decrease is predicted when levies change by a percentage value, an absolute level or are partially harmonised to a threshold.
Study Item 1: The measurement of cost-effectiveness (EUR per tonne of CO2 avoided) allows for the assessment of relative decarbonisation benefits of policies, but may not always capture their overall environmental impact. Wind, solar and energy efficiency have similar cost-effectiveness, while cogeneration of heat and power is less cost effective. Focusing on decarbonisation objectives only, multi-technology auctions improve cost-effectiveness by prioritising less costly technologies. If potential inframarginal rents and dynamic effects are also considered, then technology specific auctions may exhibit lower carbon mitigation costs in some cases.
Study Item 2: Research on operating and investment aid is reviewed, with the finding that for environmentally friendly energy aid, some distortions have arisen from the nature of aid, but that both investment and especially operating aid can yield positive outcomes.
Analysis of four actual schemes with operating or investment aid suggests that precise scheme design matters for success and often evolves with time. Three aid schemes are examined for industrial decarbonisation. Aid levels of 40% for fixed aid intensity are deemed unlikely, if the maximum aid intensities remain unchanged, to provide sufficient support for several industrial decarbonisation routes.
Study Item 3: Empirical studies support the relevance of electro-intensity and trade intensity for eligibility of energy-intensive users for levy exemptions in the EEAG. The analysis of levies from 2011 to 2018 highlights their large heterogeneity across sectors, countries and over time. Scenarios harmonising levies to the highest levy and abolishing exemptions lead to a substantial decrease in profits. A limited profit decrease is predicted when levies change by a percentage value, an absolute level or are partially harmonised to a threshold.
| Original language | English |
|---|---|
| Publisher | European Commission |
| Number of pages | 355 |
| ISBN (Print) | 978-92-76-38641-4 |
| DOIs | |
| Publication status | Published - 2021 |
Keywords
- state aid environment energy
