Carbon leakage: an overview. CEPS Special Report No. 79, 6 December 2013

Carbon leakage is central to the discussion on climate policy, given the confluence of issues that are currently being debated, including the 2030 Energy and Climate Framework and the review of the EU carbon leakage list by 2014. Carbon leakage is the result of asymmetrical carbon policies, especially carbon pricing, and the resulting carbon cost, which affects the international competitive position of some EU industry and could displace production and/or investment, and the emissions of the activities displaced. This paper identifies the difference between carbon price and carbon cost to leakage exposed industry as one of two fundamental issues to be understood and addressed; lack of visibility on future climate policies and anti-leakage provisions is the other key issue. While this is a global issue, most of the experience has been accumulated in the EU. Carbon leakage is only one of the factors that could affect the competitive position of sectors, but it is difficult to attribute the impact of carbon costs versus other variables such as energy costs, labour, etc. Studies have predicted the risk of a significant amount of production leakage in a number of energy-intensive industries. To address the danger, they were included in the EU ETS carbon leakage list, which gave them access to free allowances. However, a limited number of studies undertaken after the end of the second trading period (2012) show little evidence of production leakage and asks the question whether the issue has not been blown out of proportion. The paper argues that the past may not be a good representation of the future, as it was heavily influenced by a high level of free allocation, the exceptional economic downturn, CO2 prices significantly below what was anticipated, as well as the potential for changes in some fundamental variables such as the shrinking pool of allowances available for free allocation. It emphasises the need for a well-informed debate in the EU on measures to address carbon leakage post-2020, underpinned by a number of options, and objective criteria to evaluate those options. It emphasises that the debate should cover both investment and production leakage, caused by both direct and indirect carbon costs.

Making the Most of EU Labour Mobility. Report of a CEPS Task Force in Cooperation with the Bertelsmann Foundation. CEPS Task Force Report, 7 October 2014

This Task Force report combines the most recent data from Eurostat with national sources to highlight the most significant labour mobility trends within the EU. Overall, the recent recession has not induced previously immobile workers to become more mobile, at least not in the larger member states. Mobility flows have moved away from crisis countries in response to the economic downturn but the desired increase in south-north mobility has not been observed so far. This leads the authors to conclude that successfully fostering mobility within EU15 countries requires tremendous effort. It is important that workers who are willing and able to move are not discouraged from doing so by unnecessary barriers to mobility. Improving the workings of the EURES system and its online job-matching platform; better cooperation of national employment agencies; streamlining the recognition of qualifications; and supporting language training within the EU are important contributions to labour mobility. The authors conclude that the EU is right to defend the free movement of workers. National governments should keep in mind that their ability to tap into an attractive foreign labour supply also hinges upon the perception of how mobile workers are treated in destination countries. If the political imperative requires regulations to be changed, such as the one guiding the coordination of social security, it is essential that no new mobility barriers are put in place.

Ukrainians' EU migration prospects. OSW Commentary No. 128, 10.03.2014.

The political crisis in Ukraine, particularly the bloodshed seen on 18–20 February and the subsequent Russian intervention in Crimea, has sparked fears of another possible wave of immigrants heading to the EU. However, the country was partially politically stabilised (at least in its central and western parts), and this has made the scenario of a mass migration of people from Ukraine rather unlikely. If there is no civil war in Ukraine, any further development of the political situation in Ukraine may have only an indirect impact on the actual migration. Should the political instability continue, the Ukrainian economy remain in recession while jobs are available for Ukrainian immigrants in the EU, then an increase in the migration of Ukrainian citizens to the EU, including Poland, would be possible. In the short term there may be two characteristic groups of immigrants: (1) young people who will attempt to leave Ukraine for good due to the lack of job opportunities; (2) circulating migrants, mainly from western Ukraine, who will be looking for temporary jobs. Only if the economic downturn trend and political turmoil in Ukraine continues for a longer time, will settlement migration increase.

Ukrainian economy on the verge of recession. OSW Commentary No. 96, 2012-11-21

In the third quarter of 2012, Ukraine’s economy recorded negative growth (-1.3%) for the first time since its 2009 economic crisis. Q4 GDP is projected to suffer a further decline, bringing Ukraine into formal recession. In addition to the worsening macroeconomic indicators, Ukraine is also facing a series of concomitant economic problems: a growing trade deficit, industrial decline, shrinking foreign exchange reserves, and the weakening of the hryvnia. Poor economic growth is expected to result in lower than projected budget revenues, which in turn could lead to the sequestration of the budget in December. The decline evident across the key economic indicators in the second half of 2012 brings to a close a period of relative economic stability and two years of economic growth, which had been seen as a significant personal achievement of President Viktor Yanukovych and the ruling Party of Regions. The health of the Ukrainian economy largely depends on the state of the country’s export- -oriented industries. The current economic forecasts for foreign markets are not very optimistic. It is impossible to determine whether the current economic downturn is likely to be merely temporary or whether it heralds the onset of a prolonged economic crisis. The limited capacity to deal with the growing economic problems may mean that Kiev will need to seek financial support from abroad. This is particularly significant with regard to external debt servicing, since in 2013 Ukraine will need to pay back around 9 billion USD, including over 5.5 billion USD to the International Monetary Fund. In order to overcome the recession and stabilise public finances, the government may be forced to take a series of unpopular measures, including raising the price of natural gas and utilities. These measures have been stipulated by the IMF as a condition of further financial assistance and the disbursement of the 12 billion USD stabilisation loan granted to Ukraine in July 2010. The only alternative for Western loans and economic reforms appears to be financial support from Russia. The price for Moscow’s help might however turn out to be very high, and precipitate a turn in Kiev’s foreign policy towards a gradual re-integration of former Soviet republics under Moscow-led geopolitical projects.

The case for a European unemployment benefit scheme. CEPS Commentary, 19 May 2015

In this CEPS Commentary, Ilaria Maselli and Miroslav Beblavý argue that the European economic governance system needs to be equipped with a supranational automatic stabiliser that would kick-in automatically in the event of an economic downturn, to avoid unduly burdening national public finances. In their view, the option of creating an unemployment benefit system for the euro area should be given serious consideration. The possible variations of such a system and their implications will be the subject of in-depth study at CEPS over the coming year.

The War republics in the Donbas one year after the outbreak of the conflict. OSW Commentary Number 174, 17 June 2015

More than one year since the first pro-Russian moves in the Donbas, separatists have taken control of parts of the Donbas and Luhansk oblasts but are still unable to form truly functioning administrative structures. The exercise of power by the central administration of the so-called ‘Donetsk People’s Republic’ (DPR) and ‘Luhansk People’s Republic’ (LPR) is restricted to resolving problems as they arise, while administration proper is the prerogative of the local authorities reporting to them which had been performing this function before the conflict broke out. The way the situation is developing and the fact that access to information is restricted make it difficult to determine the structure of the separatist government in more detail, precisely how it is organised, and what the internal hierarchy is like. The overriding goal of the governments of the DPR and the LPR is to maintain and develop their military potential. In effect, the lives of the so-called republics are subordinate to military goals. The Donbas separatism is a conglomerate of different groups of interests, with Russia at the fulcrum. Its representatives set the main tactical and strategic goals and thus have a decisive influence on the development of the situation in the region. Individual separatist groupings come into conflict, and some oligarchs linked to the former Party of Regions circles have also been making attempts to maintain their influence. The struggle between individual groups of interest is intensifying as the situation on the war front becomes calmer. Since the situation has temporarily stabilised after the seizure of Debaltseve, the central governments of the DPR and the LPR have made attempts to expand their influence, combating armed criminals who are outside their control and that of Russia. The civilian population is taking the brunt of the devastation caused by the war and the increasing militarisation of the region. Despite the fact that the intensity of the fighting on the war front is falling, worsening humanitarian problems are causing refugees to continue their flight from the territories controlled by the separatists. 2 million people have fled the conflict zone since the beginning of the war: 1.3 million of them have found shelter in other regions of Ukraine, and more than 700,000 have left for Russia. The region has also sustained great economic losses – most mines have been either destroyed or closed, many industrial plants have restricted or completely discontinued their production, and many firms have been taken over by force. In effect, the region has seen an economic downturn.