The Framework for Various Approaches and the New Market Mechanism. CEPS Special Report No. 90, 3 October 2014

In its conclusions in June 2014, the 40th session of the Subsidiary Body for Scientific and Technological Advice (SBSTA 40) invited submissions on the Framework for Various Approaches (FVA), New Market Mechanism (NMM) and Non Market Approaches (NMA) by 22 September 2014. This document is the submission by the Centre from European Policy Studies (CEPS) in response to that invitation, and covers both FVA and NMM.

The Market Stability Reserve in Perspective. CEPS Special Report No. 91, October 2014

This Special Report aims to contribute to the debate on the Market Stability Reserve (MSR), which was introduced by the European Commission in a legislative proposal of January 2014. The MSR would introduce a degree of supply management into the EU Emissions Trading System (ETS). This report is the result of various meetings with ETS-stakeholders throughout 2014. It discusses the MSR’s rationale and reviews the different options available for its design, governance and timing, as well as its consequences for the functioning of the EU ETS and the EU’s climate and energy policy.

The Impact of TTIP: The underlying economic model and comparisons. CEPS Special Report No. 93/13 October 2014. [TTIP Series No. 1]

What are the economic and other impacts of the Transatlantic Trade and Investment Partnership? At the request of the European Parliament, CEPS has provided an appraisal of the TTIP Impact Assessment carried out by the European Commission, with special elaboration of the underlying economic model. The methodology applied by the Centre for Economic Policy Research (CEPR) for this economic modelling is analysed in depth, together with the assumptions used to make TTIP amenable to an economic appraisal. The research paper also compares the IA on TTIP with selected previous empirical economic assessments of EU trade agreements and with a set of alternative studies on TTIP itself. In reading our findings, two central caveats should be kept in mind that affect any analysis of the CGE model included in the European Commission’s Impact Assessment. First, TTIP is a rather unusual bilateral trade agreement; and second, TTIP is so wide-ranging that an alternative approach, such as the so-called ‘partial’ (equilibrium) approach – already a second-best solution – would be totally inappropriate to the case under examination.

Priorities for the Juncker Commission: Policy recommendations and advice from the research team at CEPS. CEPS Special Report No. 92, 22 October 2014

In the months leading up to his nomination as President of the European Commission by the European Council in June 2014 through to his approval by the European Parliament in mid-July and finally his approval at a second special summit in August, CEPS’ researchers have closely followed the travails of Jean-Claude Juncker. We have also carefully studied his fundamental restructuring of the College in re-grouping commissioners around seven project teams, each headed by a vice-president. In our view, these changes promise to improve internal coordination, policy-making and transparency of rule-making and hopefully will reduce the personalisation of portfolios. This Special Report brings together under a single cover a series of 14 separate commentaries prepared by senior CEPS researchers, offering their assessment of these profound changes underway and their policy advice to the new commissioners from the perspective of their field of specialisation.

Economic Incentives for Indirect TTIP Spillovers. CEPS Special Report No. 94/October 2014 [TTIP Series No. 2]

A deep, comprehensive and ambitious TTIP should not undermine or otherwise negatively affect the WTO and its signatories. Among other things, this means that trade diversion ought to be minimised and positive spillovers stimulated. The present CEPS Special Report provides some elementary quantification, which helps to understand the economic incentives for third countries to seek regulatory alignment with TTIP results, where relevant, and for which TTIP should be ‘open’. It focuses on ‘indirect’ spillovers and employs a rather aggregate economic approach. We find that, of three groups of countries that are important for trade with the EU and the US, the ‘closest’ neighbours (NAFTA, EEA, Switzerland and Turkey) exhibit powerful incentives to align so as to benefit from positive spillovers. This is less clear for two other groups. Of the (seven) ‘biggest traders’ (in manufactured goods, for which spillovers matter most), China turns out to have the greatest interest in alignment in selected sectors, followed by Israel, Japan and South Korea. Whereas the latter three either have or are negotiating FTAs with the US and the EU, precisely China has none and remains outside TPP as well. In terms of sectors, the chemical sector followed by electronic equipment are by far the most important, with agro-products and fish as a good third (SPS issues). However, in chemicals and electrical equipment, the TTIP negotiations so far, and recent US/EU regulatory cooperation, do not indicate an ambitious approach, which could reduce regulatory barriers to market access drastically.

Improving the Effectiveness of Sanctions: A Checklist for the EU. CEPS Special Report No. 95, 6 November 2014

The increasingly frequent imposition of sanctions by the EU over the past decade has not been accompanied by a thorough pre-assessment and contingency planning stage, which, argue the authors, has led to the formulation of suboptimal sanctions regimes. This paper proposes a practical pre-assessment and contingency planning of sanctions – a checklist, which departs from the ‘ad hoc-ism’ of current decision-making on sanctions. The checklist includes the identification of resources linked to the objectionable policies; the leverage of the EU; the costs to the EU; the legality of the measures; their unintended effects; the expected contribution towards EU goals; their coherence with overall EU external relations; and the communication of these policies.

Does EU regulation hinder or stimulate innovation? CEPS Special Report No. 96, 19 November 2014

Introduction. One frequently hears the question posed in the title to this report, but there is little systematic analytical literature on the issue. Fragmented evidence or anecdotes dominate debates among EU regulatory decision-makers and in European business, insofar as there is a genuine debate at all. This CEPS Special Report focuses on the multi-faceted, ambiguous and complex relationship between (EU) regulation and innovation in the economy, and discusses the innovation-enhancing potential of certain regulatory approaches as well as factors that tend to reduce incentives to innovate. It adopts an 'ecosystem' approach to both regulation and innovation, and study the interactions between the two ecosystems. This general analysis and survey are complemented by seven case studies of EU regulation enabling and disabling innovation, two horizontal and five sectoral ones. The case studies are preceded by a broader contextual analysis of trends in EU regulation over the last three decades. These trends show the significant transformation of the nature as well as improvement of the quality of EU regulation, largely in the deepened internal market, which tend to have a favourable and lasting effect on the rate of innovation in the EU (other things being equal). Among the findings include the following: Regulation can at times be a powerful stimulus to innovation. EU regulation matters at all stages of the innovation process. Different types of regulation can be identified in terms of innovation impact: general or horizontal, innovation-specific and sector-specific regulation. More prescriptive regulation tends to hamper innovative activity, whereas the more flexible EU regulation is, the better innovation can be stimulated. Lower compliance and red-tape burdens have a positive effect on innovation. The authors recommend incorporating a specific test on innovation impacts in the ex-ante impact assessment of EU legislation as well as in ex-post evaluation. There is ample potential for fostering innovation by reviewing the EU regulatory acquis.

Who calls the shots in the committees of the new European Parliament? CEPS Special Report No. 97, 21 November 2014

This CEPS Special Report analyses the composition of the 20 committees in the new European Parliament and how representative they are of the 28 member states, identifying which policy areas or committees are of particular interest to MEPs from certain countries. It also examines the allocation of committee chairs and party coordinator positions to assess whether the country of origin matters and if so, why. The study reveals that in general the countries’ share of representatives in the committees is very similar in most of the cases to their representation in Parliament. Still, some policy areas have a special relevance for some countries and attract their MEPs in larger numbers. Due to the procedure used in the allocation of the committee chairs, which favours the largest political groups and the largest national parties within them, MEPs from larger member states tend to hold most of these coveted positions. The internal process followed by the political groups in appointing their coordinators in the respective committees is predisposed towards MEPs with seniority, experience and good connections. All in all, the strategic relevance that national parties attach to these positions makes a difference.

Abkhazia, South Ossetia, Nagorno-Karabakh: unfrozen conflicts between Russia and the West. OSW Special Report, 9 July 2008

The Southern Caucasus is the site of three armed conflicts with separatist backgrounds, which have remained unsolved for years: the conflicts in Georgia's Abkhazia and South Ossetia, and Azerbaijan's conflict over Nagorno-Karabakh (including the areas around Nagorno-Karabakh which were seized by Armenian separatists in the course of the war). Neither Georgia nor Azerbaijan have had any control over the disputed areas since the early 1990s. Both states are simultaneously in conflict with the separatists' informal patrons, respectively Russia and Armenia. After over a decade of relative peace during which the conflicts remained frozen, tension has recently risen considerably: in the case of Abkhazia and South Ossetia, large-scale fighting may break out in the coming months, whereas in the case of Nagorno-Karabakh and the Azeri-Armenian conflict, such a threat may materialise within the next five years. The current formula for politically resolving the conflicts is ineffective and close to exhaustion, and the prospect of any alternative peace plans being developed is rather distant. The conflicts in the Southern Caucasus are of increasing concern to the West, mainly because of the Western actors' constantly growing political and economic involvement in Georgia and Azerbaijan (including support for reforms and development of the gas and oil transmission infrastructures), as well as its less intensive commitments in Armenia. An outbreak of open fighting over the separatist regions would destabilise the Southern Caucasus, largely undoing the results of the actions which the EU, NATO and the USA have taken in the region in recent years. Moreover, the situation in the Southern Caucasus, especially the separatisms themselves, have in fact become an element in the wider geopolitical game between the West and Russia. For Russia, the stakes are maintaining its influence in the region, and for the West, demonstrating its ability to effectively promote democracy and economic modernisation in the countries bordering it.

The Ukraine crisis so far. [EPC SPECIAL COLLECTION]

Collection of papers recently published by the European Policy Centre on the crisis involving Ukraine, Russia and the European Union

An Unemployment Insurance Scheme for the Euro Area: A simulation exercise of two options. CEPS Special Report No. 98/December 2014

This study offers an in-depth economic analysis of the two main proposals for the creation of a European unemployment insurance scheme. One proposes the creation of a harmonised European unemployment benefit scheme that would apply automatically to every eligible unemployed person. The alternative, termed ‘reinsurance’ here, would transfer funds to national unemployment insurance schemes to finance benefits from the centre to the periphery when unemployment is measurably higher than normal. The rationale behind these proposals is to set up an EU-level shock absorber to overcome coordination failures and the crisis-budget constraints of individual countries. The authors consider the possible trade-offs and challenges of, for example, the definition of the trigger, the fiscal rule and the harmonisation of national benefits. They conclude that while both options are viable, ‘reinsurance’ offers a stronger stabilisation effect for the same amount of European distribution.

Enhancing the Legitimacy of EMU Governance. CEPS Special Report No. 98/December 2014

This CEPS Special Report investigates ways to enhance the legitimacy of economic governance in the Economic and Monetary Union (EMU) without introducing Treaty changes. It suggests changes in the governance framework at both the institutional and economic level. Input-oriented legitimacy can be improved by increasing parliamentary oversight on decisions related to EMU and increasing the accountability of the Eurogroup. Output-oriented legitimacy can be improved by strengthening the ability of EMU to reduce the emergence of negative externalities and to mitigate their impact, through market and fiscal risk-sharing mechanisms.