REGULATORY SCRUTINY BOARD OPINION Review of EU rules on fluorinated greenhouse gases

EUROPEAN COMMISSION
25.02.2022
SEC(2022) 156
REGULATORY SCRUTINY BOARD OPINION
Review of EU rules on fluorinated greenhouse gases
{COM(2022) 150}
{SWD(2022) 96, 97}
Offentligt
KOM (2022) 0150 - SEK-dokument
Europaudvalget 2022
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This opinion concerns a draft impact assessment which may differ from the final version.
Commission européenne, B-1049 Bruxelles - Belgium. Office: BERL 08/010. E-mail: regulatory-scrutiny-board@ec.europa.eu
EUROPEAN COMMISSION
Regulatory Scrutiny Board
Brussels,
RSB
Opinion
Title: Impact assessment /
Overall 2nd
opinion: POSITIVE WITH RESERVATIONS
(A) Policy context
Fluorinated greenhouse gases (F-gases) are manmade chemicals used as refrigerants in
cooling equipment and heat pumps, and in foams and asthma sprays.
Hydrofluorocarbons (HFCs) are a type of F-gases used as a substitute for ozone depletion
substances targeted by the Montreal Protocol. However, at the same time, these gases are
very powerful greenhouse gases – several thousand times stronger than carbon dioxide,
also having regard to their persistence in the atmosphere. Thus F-gases emissions count
towards the climate targets under the Effort Sharing Regulation. The F-gas Regulation was
designed to facilitate an agreement on HFCs under the Montreal Protocol, which had
eliminated ozone depleting substances successfully in similar applications. It is also the
EU’s main instrument to avoid F-gas emissions of HFCs. An evaluation annexed to this
impact assessment finds that the F-gas Regulation has significantly reduced emissions of
F-gases. However, it is not sufficient to address the problem of HFCs required to meet the
new climate targets.
This impact assessment reviews the rules on F-gases to ensure new compliance with the
Montreal Protocol obligations, additional contribution to the European Green Deal targets
and improvement of implementation, enforcement, monitoring and reporting.
(B) Summary of findings
The Board notes the clarifications in the revised report on the links with the Montreal
Protocol and its amendments.
However, the report still contains significant shortcomings. The Board gives a
positive opinion with reservations because it expects the DG to rectify the following
aspects:
(1) The choice of a static baseline ignores the measures that would be taken by the
Member States under their Effort Sharing Regulation targets. The report does
not convincingly identify the remaining gap between the Kigali Amendment and
other GHG targets that justifies more ambitious emission reduction under the
initiative.
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(2) The report does not bring out clearly enough the trade offs and political choice
between providing emission reduction flexibility to Member States under the
alignment option and more prescriptive EU level measures under the emission
reduction options. The feasibility of the most ambitious option remains
questionable.
(3) The report does not explicitly set out the assumptions and data limitations
underpinning the environmental and economic impacts. It also does not clearly
present the administrative costs of the preferred option.
(C) What to improve
(1) The report should explain clearly the problem and remaining gap it seeks to address
given the Kigali Amendment to the Montreal Protocol and other EU greenhouse gases
reduction measures and commitments. It should demonstrate the need to go beyond
F-gases reductions required by the Kigali Amendment, given that there is no gap under the
EU’s climate targets with the current greenhouse gases reduction measures.
(2) The report should justify its choice of a static baseline given the wide range of other
initiatives aimed at GHG reduction and Member States’ action. It should justify why it
considers that the Effort Sharing Regulation would be ineffective.
(3) The report should explain why the least ambitious option alone is not sufficient, as it
would seem to comply with the EU’s commitments under the Kigali Amendment. It should
also justify and assess the political feasibility of maintaining the most ambitious option
given the very high costs involved.
(4) The report should give a clearer account of the methodology underpinning the
assessment of impacts. It should provide a clearer presentation of the overall costs and
benefits of the options and compare them in terms of effectiveness, efficiency and
coherence. It should clearly present the administrative costs for all elements of the
preferred option and explain the basis for the calculations. It should also better present the
main assumptions and limitations of the AnaFgas and GEM-E3 models used in assessing
the impacts.
(5) The report should clarify the differences between the previous modelling results (EU
long-term strategy for a climate-neutral economy) and the current estimates.
(6) The report should more explicitly explain what success would look like as regards
specific objectives on implementation, monitoring and coherence. It should specify
whether the review in 2033 will be an evaluation.
The Board notes the estimated costs and benefits of the preferred option in this initiative,
as summarised in the attached quantification tables.
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(D) Conclusion
The DG must revise the report in accordance with the Board’s findings before
launching the interservice consultation.
If there are any changes in the choice or design of the preferred option in the final
version of the report, the DG may need to further adjust the attached quantification
tables to reflect this.
Full title Impact Assessment Report accompanying the document
Proposal for a Regulation of the European Parliament and of
the Council on fluorinated greenhouse gases
Reference number PLAN/2020/7308
Submitted to RSB on 8 February 2022
Date of RSB meeting Written procedure
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ANNEX: Quantification tables extracted from the draft impact assessment report
The following tables contain information on the costs and benefits of the initiative on
which the Board has given its opinion, as presented above.
If the draft report has been revised in line with the Board’s recommendations, the content
of these tables may be different from those in the final version of the impact assessment
report, as published by the Commission.
I. Overview of Benefits (total for all provisions) – Preferred Option
Description Amount Comments
Direct benefits
Reduced climate
emissions
Additional savings of direct emissions:
40 MCO2e by 2030
308 MtCO2e by 2050
Indirect emissions:
Energy savings 2.5 GWh/year (2024-2036
average; ~0.3% of baseline energy use),
2050: 8.2 GWh/year savings (~0.5% of
baseline energy use)
Saved indirect CO2 emissions 2030 ~ 0.3
Mt CO2/a ; 2050: ~0.3 Mt CO2/year
Emission savings mostly come
from the quota system and the
accompanying prohibitions as
well as the emission avoidance
measure (A3); many other
measures contribute small
savingsThe technology
conversion also leads to small
energy savings
Reduction of
administrative
costs for
businesses
Savings of €4.5m per year Delivered by i.a. relaxing
thresholds for placing on the
market of products and
equipment, quota application in
3-year cycle rather than annually
and an electronic verification
process
Reduction of
administrative
costs for
authorities
Savings of ca 2,850 days per year across
Member State competent authorities, DG
CLIMA and EEA.
Driven by savings to MS
competent authorities from
aligning reporting and verification
thresholds and requirement for
specification of ‘NIL’ reporting.
Reduction of
adjustment costs
to end-users
(mostly
businesses)
~-835 Mio € per year by 2050 Cost savings in adjustment costs
to end-users (sum of capex &
opex) in the long-term
perspective,
(in 2024-2036 time horizon
additional costs primarily due to
higher investment expenditures)
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Revenue from
quota allocation
price
~125 Mio € per year initially The quota allocation price
reduces profits in HFC supply
chain without increasing cost to
end-users. To cover admin cost
at EU level and residual amount
to be transferred to the EU
budget.
Indirect benefits
Job creation ~400 by 2030, ~6,800 by 2050 In particular in the EU
manufacture of equipment and
supplying industries
Research and
development
+ Incentive in R&D in the EU
equipment manufacturing sector
Competitiveness + Strengthened competitiveness of
EU equipment manufacturing
sector; however: drawback for
export-oriented equipment
manufacturing
GDP increase + 0.005 vs baseline by 2050 GDP increase in the long-term
perspective. In 2030 horizon:
GDP loss of ~0.001% of baseline
II. Overview of costs – Preferred option
Citizens/Private Consumers Businesses Administrations
One-off Recurrent One-off Recurrent One-off Recurrent
Direct costs
Adjustment costs:
Increased HFC refill
cost until ~2030 for
EU car owners of
ACs in old vehicles
(new cars not
affected due to MAC
Directive)
Admin
burden:
€3 million
Admin burden:
€12.1 million
per year (plus
€20.8 million
for training
costs) (the
cost savings
of €4.5 million
1 are not
included here,
see benefits
Admin
burden:
2,600 days
Admin
burden:
13,500
days per
year (does
not include
savings of
2,850, see
benefits
above)
1
According to Annex Error! Reference source not found. the individual measures result in total gross
savings of €4.5 million and additional gross burden of €12.1 million. These numbers cancel each other out
when deriving summary costs and are therefore not apparent in the summary tables in e.g. section Error!
Reference source not found.
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above)
Adjustment
costs to
business end-
users (sum of
capex & opex)
~421 Mio €
per year
(2024-2036
average),
turning into
cost savings
of ~835 Mio €
per year by
2050.
Also,
distributional
costs linked to
HFC gas
prices
Indirect costs Adjustment costs:
Potential pass-
through to
consumers (e.g.
ACs, heat pumps) of
higher compliance
cost for businesses
not significant in
most sectors as
additional cost <1%
of total operating
cost (including for
MDIs where the HFC
propellant gas costs
a very small fraction
of the total price)
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EUROPEAN COMMISSION
Regulatory Scrutiny Board
Brussels,
RSB
Opinion
Title: Impact assessment / Review of EU rules on fluorinated greenhouse gases
Overall opinion: NEGATIVE
(A) Policy context
Fluorinated greenhouse gases (F-gases) are manmade chemicals used as refrigerants in
cooling equipment and heat pumps, and in foams and asthma sprays.
F-gases are powerful greenhouse gases – several thousand times stronger than carbon
dioxide. They count towards the climate targets under the Effort Sharing Regulation. The
F-gas Regulation was designed to deliver the EU’s targets to reduce ozone-depleting gas
emissions under the Montreal Protocol. It is also the EU’s main instrument to avoid F-gas
emissions of hydrofluorocarbons (HFCs). An evaluation annexed to this impact assessment
finds that the F-gas Regulation has significantly reduced emissions of ozone-depleting F-
gases. However, it is not sufficient to address the problem of HFCs required to meet the
new climate targets.
This impact assessment reviews the rules on F-gases to ensure new compliance with the
Montreal Protocol long-term targets, additional contribution to the European Green Deal
targets and improvement of implementation, enforcement, monitoring and reporting.
(B) Summary of findings
The Board notes the comprehensive analysis and detailed information presented in
the annexes.
However, the Board gives a negative opinion, because the report contains the
following significant shortcomings:
(1) The report is unclear about the contribution of this initiative to the Climate
Target Plan and about the coherent articulation between the F-gases Regulation
and the Effort Sharing Regulation obligations.
(2) The report does not sufficiently explain the relationship between the objective to
fully align with the existing and long-term Montreal Protocol targets against
ozone layer depletion and the objective to increase additional F-gas emission
reductions to further contribute to European climate targets.
(3) The report does not explain whether and how changes in the Effort Sharing
Regulation and the Ozone Regulation affect the baseline scenario.
(4) The report does not explain how the ‘fair’ level contribution figure was arrived
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at, which sectors it would apply to, and how it relates to abatement cost figures in
other ‘Fit for 55’ initiatives.
(5) Not all options appear to be realistic and compatible with the objective to achieve
additional F-gas emission reductions to contribute to the climate targets in a fair
and cost-efficient way.
(C) What to improve
(1) The report should explain the relationship between the objective to fully align with the
Montreal Protocol and the objective to achieve additional F-gas emission reductions for
climate purposes.
(2) The report should explain to what extent the revision of the F-gases Regulation
contributes to the EU climate targets. It should clarify the interaction and complementarity
between this Regulation and the inclusion of targets on F-gases as part of Member States’
targets under the Effort Sharing Regulation. The report should be more specific on the level
of emission reductions targeted by the revision. It should clarify whether the objective to
achieve further emissions reduction in a fair and cost-effective manner is a binding
obligation deriving from the Climate Target Plan.
(3) The report should develop the baseline and its evolution in more detail, explaining
what would happen if the F-gases Regulation is not revised, taking into account the
revisions of the Effort Sharing Regulation and the Ozone Regulation.
(4) The report should present a set of policy options that can tackle all the objectives. The
report should bring out clearly the credible policy choices. If the revision is bound by the
objective to achieve additional emission reductions in a fair and cost-efficient manner, the
report should acknowledge that options 1 and 3 are not realistic or fair options and thus
appear not to be compatible with that objective. The report should better justify the
composition of the remaining option and why this would be the optimal set of measures.
(5) When presenting the options, the report should also better explain the basis and
reasoning behind selecting a level of marginal abatement costs of up to EUR 390 / tCO2e,
which sectors this applies to, and how this relates in fairness terms to abatement costs for
other greenhouse gases or other sectors in the Fit for 55 package.
(6) The report should improve the overall narrative and reader friendliness, given the
technical complexity of the topic. The report should describe in more detail what the
underlying problem is and what the evidence for it is, including information on the
problems, their scale and the sources of evidence. The report should make links between
the problems and the results of the evaluation and any other relevant sources of
information. The main report should present briefly the methodology and the main
assumptions underpinning it, even if the details are in the annexes.
(7) The impact analysis should highlight the main conclusions of the analysis and explain
which factors influence its main findings. It should clearly present the expected impacts on
the main variables and the average marginal abatement cost for each option. It should
explain what is behind the expected changes in the macroeconomic variables, why
consumption increases in the long term, why investment does not increase and what are the
main conclusions of the analysis on exports and imports.
(8) The report should specify how and when implementation will be monitored and
evaluated in the future. It should clearly set out what success would look like, clear
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monitoring arrangements and specific indicators and timescales.
(9) The report should include, and better engage with, stakeholder views throughout the
report. It should clearly reflect diverging stakeholder views.
Some more technical comments have been sent directly to the author DG.
(D) Conclusion
The DG must revise the report in accordance with the Board’s findings and resubmit
it for a final RSB opinion.
Full title Impact Assessment Report accompanying the document
Proposal for a Regulation of the European Parliament and of
the Council on fluorinated greenhouse gases.
Reference number PLAN/2020/7308
Submitted to RSB on 17 December 2021
Date of RSB meeting 19 January 2021
Electronically signed on 25/02/2022 12:38 (UTC+01) in accordance with article 11 of Commission Decision C(2020) 4482