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A New Tool in the Box?

The Cumulated Cost Assessment

Published online by Cambridge University Press:  20 January 2017

Lorna Schrefler ,
Giacomo Luchetta  and
Felice Simonelli
Lorna Schrefler
Affiliation:
Regulatory Policy Unit, Centre for European Policy Studies (Brussels)
Giacomo Luchetta
Affiliation:
Economisti Associati (Bologna)
Felice Simonelli
Affiliation:
Regulatory Policy Unit, Centre for European Policy Studies (Brussels)
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Abstract

The year 2013 has witnessed a new entry in the EU “better regulation” toolbox: the Cumulated Cost Assessment (CCA). The CCA is set to answer an apparently simple question: what is the cumulative cost imposed by a selection of EU rules and policies on a given economic sector? In this contribution we present the CCA methodology and its building blocks, as well as the results of the first two empirical applications of this tool. More importantly, we elaborate on two key features that make the CCA a valuable addition to the better regulation toolbox: it creates a methodological bridge between the policy and competitiveness assessment instruments, and it clarifies empirically how a wide array of policies interact with one another when and after they are actually implemented, an element that is often a weak link in policy–appraisal. We conclude with some remarks on how the CCA opens the avenue for a set of challenging and interesting methodological and policy considerations.

Type
Symposium on Policy Evaluation in the EU
Information
European Journal of Risk Regulation , Volume 6 , Issue 1 , March 2015 , pp. 68 - 78
Copyright
Copyright © Cambridge University Press 2013

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References

1 The authors have been involved, together with many other colleagues to whom a deep gratitude needs to be expressed, in the two Cumulated Cost Assessments requested by the European Commission on the steel and aluminium industries. However, the opinions expressed in this article represent only their own.

2 Indeed, the original better regulation agenda that followed the Mandelkern report of 2001 was successively refocused on growth a jobs in 2005 and became the “smart regulation agenda” in 2010. Cf. Commission Communication, Smart Regulation in the EU, COM(2010)543. More recently, the REFIT Communication and the concept of regulatory fitness have complemented the initial better regulation approach. Cf. Commission Communication, EU Fitness, COM(2012)746. In terms of tools, 2006 saw the forceful entry of the Standard Cost Model. For further details, see i.a. Renda, Andrea, Impact Assessment in the EU: The State of the Art, The Art of the State, (Brussels: Centre for European Policy Studies, 2006).Google Scholar

3 Despite variations in terminology and modes of implementation, the better regulation toolbox normally features the following items: regulatory impact assessment, the simplification of administrative procedures, consultation, codification of legislation, ex post evaluation, risk–based approaches to public policy, reduction of administrative burdens.

4 Please note that the terms ‘tool’ and ‘instrument’ are used interchangeably in this contribution.

5 For a comprehensive theoretical overview, see Sabatier, Paul, Theories of the Policy Process. Theoretical Lenses on Public Policy, (Westview Press, 2007).Google Scholar

6 On the use (or misuse) of evidence and specific tools in policymaking, see i.a. Boswell, Christina, “The Political Functions of Expert Knowledge” 15, Journal of European Public Policy (2008), pp. 471 et sqq. CrossRefGoogle Scholar; Hertin, Julia, Turnpenny, John, Jordan, Andrew et al., “Rationalising the Policy Mess? Ex ante Policy Assessment and the Utilisation of Knowledge in the Policy Process”, 41 Environment and Planning A (2008), pp. 1185 et sqq. Google Scholar; Schrefler, Lorna, Economic knowledge in regulation: The use of expertise by independent agencies, (Colchester ECPR Press, 2013).Google Scholar

7 Discussing the methodological approaches to define an industrial sector falls outside the scope of this article. Nonetheless, it is worth stressing that a proper definition of the sector under analysis and the identification of all the players involved is a prerequisite to any CCA. This definition cannot simply rely on standard industry classifications (e.g., Statistical Classification of Economic Activities in the European Community – NACE) and requires an in depth analysis of the main features of the sector under analysis. For instance, in the application of the CCA to the aluminium sector, the research team realized that a focus on the NACE code 24.42 (aluminium production) would have provided a partial picture of the industry that includes also a large number of aluminium casters grouped, with casters of other metals, under the NACE code 24.53 (casting of light metals).

8 Claudio M. Radaelli, “Evidence–based policy and political control: what does regulatory impact assessment tell us?”, presentation held at the ECPR Joint Sessions of Workshops, University of Rennes, France, April 2008.

9 See Hertin, et al., Rationalising the Policy Mess, supra note 6; Meuwese, Anne, Impact Assessment in EU Law–Making, (Alphen aan den Rijn: Kluwer, 2008)Google Scholar; Nilsson, Mans, Jordan, Andrew, Turnpenny, John et al., “The Use and Non–use of Policy Appraisal Tools in Public Policy Making: An Analysis of Three European Countries and the European Union”, 41 Policy Sciences (2008), pp. 335 et sqq. CrossRefGoogle Scholar; Renda, Andrea, Law and Economics in the RIA World, (Cambridge: Intersentia,2011)Google Scholar; Sanderson, Ian, “Intelligent Policy Making for a Complex World: Pragmatism, Evidence, and Learning”, 57 Political Studies (2009), pp. 699 et sqq. Google Scholar

10 Alemanno, Alberto, “The Better Regulation Initiative at the Judicial Gate: A Trojan Horse within the Commission's Walls or the Way Forward?”, 15 European Law Journal (2009), pp. 382 et sqq. CrossRefGoogle Scholar; Alemanno, Alberto and Meuwese, Anne, “Impact Assessment of EU Non–Legislative Rulemaking: The Missing Link in ‘New’ Comitology”, 19 European Law Journal (2012), pp. 76 et sqq. CrossRefGoogle Scholar; Dunlop, Claire A., Maggetti, Martino, Radaelli, Claudio M. and Russel, Duncan, “The Many Uses of Regulatory Impact Assessment: A Meta–Analysis of EU and UK Cases”, 6 Regulation and Governance (2012), pp. 23 et sqq. CrossRefGoogle Scholar; Giacomo Luchetta and Sven Hoeppner, “Praising Their Own Wine? EU Legislators and Non–Falsifiable Statements in Impact Assessment”, presentation held at the 2012 ECPR Conference on Regulation and Governance, June 2012, University of Exeter.

11 Supra note 2.

12 The Standard Cost Model for the measurement of administrative burdens is also exclusively focused on costs.

13 Revesz, Richard L. and Livermore, Michael A., Retaking Rationality. How Cost–Benefit Analysis Can Better Protect the Environment and Our Health, (New York: Oxford University Press, 2008).Google Scholar

14 Cf. i.a. European Commission, “European Competitiveness Report 2013: Towards Knowledge–Driven Reindustrialisation”, SWD(2012)347.

15 Pelkmans, Jacques and Galli, Giamapolo (eds.), Regulatory Reform and Competitiveness in Europe, vol. I, (Cheltenham: Edward Elgar, 2000).Google Scholar

16 Porter, Michael E., Competitive Advantage: Creating and Sustaining Superior Performance, (New York: Free Press, 1985).Google Scholar

17 Pelkmans and Galli, Regulatory Reform and Competitiveness, supra note 15.

18 Porter also describes a third strategy, the so–called segmentation, which consist of applying one of the two main strategies on a focused market segment with a narrow scope. Porter, Michael E., Competitive Strategy: Techniques for Analyzing Industries and Competitors, (New York: Free Press, 1980).Google Scholar

19 Krugman, Paul, “Competitiveness, a Dangerous Obsession”, 73 Foreign Affairs (1974), pp. 28 et sqq. CrossRefGoogle Scholar; Pelkmans, and Galli, , Regulatory Reform and Competitiveness, supra note 15; Annoni, Paola and Kozovska, Kornelia, European Competitiveness Report, JRC Scientific and Technical Reports, (Luxembourg: Publications Office of the European Union, 2010).Google Scholar

20 Cf. Commission Communication, For a European Industrial Renaissance, COM(2014)14.

21 European Commission, Impact Assessment Guidelines, SEC(2009)92.

22 Commission Staff Working Document, Operational Guidance for Assessing Impacts on Sectoral Competitiveness within the Commission Impact Assessment System – A “Competitiveness Proofing” Toolkit for use in Impact Assessments, SEC(2012)91.

23 Cf. Commission Guidance on Sectoral Competitiveness, supra note 22.

24 As long as the legislation in scope of the analysis does not result in revenues for the industry rather than costs, see e.g. the case of the ETS legislation and its mechanism of free allowances. Cf. CEPS and EA, “Assessment of Cumulative Cost Impact for the Steel Industry”, Study for the European Commission, June 2013, available on the Internet at: http://ec.europa.eu/enterprise/sectors/metals-minerals/files/steel-cum-cost-imp_en.pdf, (last accessed on June, 2014), at § 6.

25 Commission, Competitiveness Proofing Toolkit, supra note 22, at p. 7.

26 CSES, “Interim Evaluation: Functioning of the European chemical market after the introduction of REACH”, Study for the European Commission, 2012, available on the internet at: http://ec.europa.eu/enterprise/sectors/chemicals/files/reach/review2012/market-final-report_en.pdf (last accessed on June, 2014).

27 Annex 10 of the EU Impact Assessment Guidelines, supra note 21; Coletti, Paola, Evidence for Public Policy Design, (Basingstoke: Palgrave Macmillan, 2014)Google Scholar; CEPS and EA, “Assessing the Costs and Benefits of Regulation”, 2013, available on the Internet at: http://ec.europa.eu/smart-regulation/impact/commission_guidelines/docs/131210_cba_study_sg_final.pdf, (last accessed on June, 2014); International Standard Cost Model Network, “The International SCM Manual: measuring and reducing administrative burdens for businesses”, 2005, available on the Internet at: http://www.administrative-burdens.com/filesystem/2005/11/international_scm_manual_final_178.doc (last accessed on June, 2014).

28 CEPS and EA, Assessing Costs and Benefits, supra note 27, at p. 24.

29 Int’l SCM manual, supranote 27; Bertelsmann Stiftung, “Handbook for Measuring Regulatory Costs”, 2009, available on the Internet at: http://www.bertelsmann-stiftung.de/cps/rde/xbcr/bst_engl/Handbook_RCM_090421.pdf (last accessed on June, 2014).

30 Cf. Linstone, Harold and Turoff, Murray, The Delphi Method: Techniques and Applications, (Reading: Addison–Wesley, 1975).Google Scholar

31 CEPS and EA, Assessing Costs and Benefits, supra note 27; Int’l SCM manual, supra note 27; Bertelsmann Manual on Regulatory Costs, supra note 29.

32 CEPS and EA, Assessing Costs and Benefits, supra note 27;

33 When not available, company level data can also be appropriately used.

34 For example, once the production route is accounted for, steel plants are relatively homogeneous when it comes to analysing the impacts of climate change legislation; conversely they are very heterogeneous as regards the impact of environmental, and in particular air emission, legislation. Cf. infra Section IV.

35 For instance, general policies and competition policies are less likely to create (measurable) regulatory costs, and thus belong to this second group.

36 CEPS and EA, CCA on the Steel Industry, supra note 24.

37 CEPS and EA, “Assessment of Cumulative Cost Impact for the Aluminium Industry”, Study for the European Commission, October 2013, available on the Internet at: http://ec.europa.eu/enterprise/sectors/metals-minerals/files/final-report-aluminium_en.pdf, (last accessed on June, 2014)

38 Commission Communication, Action Plan for a competitive and sustainable steel industry in Europe, COM(2013)407.

39 Cf. § 3.1 and 3.4 of the Steel Action Plan, ibid.

40 This is the Blast Oxygen Furnace (BOF) production route. Its product range includes high value–added products, such as coils. It represents about 57% of crude steel production in the EU (data refers to 2011).

41 This is the Electric Arc Furnace (EAF) production route. Its product range include low value–added products, e.g. wire rods. It represents about 43% of crude steel production in the EU, and is relatively more concentrated in few Member States like Italy and Spain (data refers to 2011).

42 Cf. “Connie Hedegaard on CO2 and EU emissions trading scheme”, 4 July 2013, BBC News, available on the Internet at: http://www.bbc.com/news/uk-politics-23182671 (last accessed on June, 2014).

43 See EUROFER, “Position Paper on the EU Steel Action Plan”, available on the Internet at: http://www.eurofer.be/News%26Media/Press%20releases/SteelActionPlan.fhtml (last accessed on June, 2014).

44 Cf. Paper of the Services of DG Competition containing “Draft Guidelines on environmental and energy aid for 2014-2020”, available on the Internet at: http://ec.europa.eu/competition/consultations/2013_state_aid_environment/draft_guidelines_en.pdf (last accessed on June 2014); Cf. EAA “Response to the EU Commission's public consultation on the Environment and Energy Aid Guidelines (EEAG) 2014-2020”, available on the Internet at: http://www.alueurope.eu/wp-content/uploads/2011/08/2013_02_14EAA-Response-on-the-revision-of-Environment-and-Energy-State-aid-guidelines_Final.pdf (last accessed on June, 2014); Commission Communication, Guidelines on State aid for environmental protection and energy 2014-2020, SWD(2014)139.

45 Ironically, although the analytical content of CCA tends to remain more technical for the average reader than e.g. a classical EU impact assessment covering social, economic, and environmental aspects, the way its results are presented (i.e. in € per tonne of product) may attract more readership and press attention.

46 E.g. Cost–benefit analysis, the Fitness Checks.

47 As regards the clarification of the link between the CCA and the better regulation toolbox, the European Commission has already set some boundaries in its latest Refit Communication. Cf. Commission Communication, Regulatory Fitness and Performance Programme (REFIT): State of Play and Outlook, COM(2014)369.

48 Cf. CSES, Functioning of the European chemical market after the introduction of Reach, supra note 26.

49 Cf. Commission Guidance on Sectoral Competitiveness, supra note 22.