The use of innovative financial instruments for financing EU policies and objectives: Implications for EU and national budgets. CEPS Special Report, October 2012

This CEPS Special Report analyses the proposed expansion of innovative financial instruments in the EU Multiannual Financial Framework for the 2014–20 period. It presents the economic rationale, governance principles and criteria that these instruments should follow and compares these with proposals from the European Commission. Based on this assessment, it makes recommendations for the proposed instruments.

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.

Carbon Leakage: Options for the EU. CEPS Special Report, March 2014

This CEPS Special Report builds on the first deliverable of the project entitled “Carbon leakage: Options for the EU”. It identifies carbon costs, and the ability to pass through carbon costs, as the main risk factors that could lead from asymmetrical carbon policies to carbon leakage. It also outlines and evaluates, based on criteria discussed in the paper, options for detecting and mitigating the risk of carbon leakage in three jurisdictions, with special attention to the EU ETS (Emissions Trading Scheme). Based on the analysis of approaches currently used in a number of existing carbon pricing systems, it identifies the balance between the number of sectors identified as being at risk, and the amount of compensation provided as a risk mitigation measure, as the critical element in providing an optimum approach to address carbon leakage risks. It also identifies a risk-based approach to identifying sectors at risk as allowing for a better reflection of reality in a counterfactual argument. Finally, the paper concludes that while, with some exceptions, there has been limited carbon leakage until now, the past may not be a good reflection of the future and that measures need to be put in place for the post-2020 period. While examining a number of approaches, it identifies free allocation as the most likely way forward for mitigating the risk of carbon leakage. While other approaches may provide interesting options, they also present challenges for implementation, from a market functioning, to international trade and relations, points of view. A number of challenges will need to be addressed in the post-2020 period, with many of them part of the EU ETS structural reform package. Some of these challenges include, among others, the need to recognise, and provide for individual sectoral characteristics, as well as for changes in production patterns, due to economic cycles, and other factors. Finally, the paper emphasises the need for an open dialogue regarding the post-2020 provisions for carbon leakage as no overall Energy and Climate Package is likely to be agreed on until this matter is addressed.

The End of the Transitional Period for Police and Criminal Justice Measures Adopted before the Lisbon Treaty: Who monitors trust in the European Criminal Justice area? CEPS Liberty and Security in Europe No. 74, December 2014

This study examines the legal and political implications of the forthcoming end of the transitional period for the measures in the fields of police and judicial cooperation in criminal matters, as set out in Protocol 36 to the EU Treaties. This Protocol limits some of the most far-reaching innovations introduced by the Treaty of Lisbon over EU cooperation on Justice and Home Affairs for a period of five years after the entry into force of the Treaty of Lisbon (until 1 December 2014), and provides the UK with special ‘opt out/opt-in’ possibilities. The study focuses on the meaning of the transitional period for the wider European Criminal Justice area. The most far-reaching change emerging from the end of this transition will be the expansion of the European Commission and Luxembourg Court of Justice scrutiny powers over Member States’ implementation of EU criminal justice law. The possibility offered by Protocol 36 for the UK to opt out and opt back in to pre-Lisbon Treaty instruments poses serious challenges to a common EU area of justice by further institutionalising ‘over-flexible’ participation in criminal justice instruments. The study argues that in light of Article 82 TFEU the rights of the defence are now inextricably linked to the coherency and effective operation of the principle of mutual recognition of criminal decisions, and calls the European Parliament to request the UK to opt in EU Directives on suspects procedural rights as condition for the UK to ‘opt back in’ measures like the European Arrest Warrant.