EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 7.10.2009 
SEC(2009) 1298 
  
COMMISSION STAFF WORKING DOCUMENT 
  
Accompanying document to the  
  
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
on Investing in the Development of Low Carbon Technologies  
(SET-Plan) 
  
SUMMARY OF THE IMPACT ASSESSMENT  
{COM(2009) 519 final} 
{SEC(2009) 1295} {SEC(2009) 1296} {SEC(2009) 1297} 
 
EN 2   EN COMMISSION STAFF WORKING DOCUMENT 
SUMMARY OF THE IMPACT ASSESSMENT 
 
for the Communication on Investing in the Development of Low Carbon Technologies 
(Set-Plan) 
1. PROBLEM DEFINITION : 
Climate change is an international concern that if left unchecked would result in significant 
and lasting damage on a world wide scale. In response to this the EU (under its Energy and 
Climate Policy) adopted goals of reducing greenhouse gas emissions by 20%, and increasing 
the proportion of European Energy which come s from renewable sources to 20% by 2020. 
Following on from this CO 2 emissions should have fallen by 80%  from their current levels by 
2050. A variety of initiatives, most prominen t amongst which is the European Emissions 
Trading System have arisen in order to help meet these goals. 
One track being pursued is the development of low carbon technologies, essential both to the 
achievement of the goals set out under the Energy and Climate Policy, but also as a means to ensuring Europe's future competitiveness. The European Strategic Energy Technology (SET) Plan adopted within the Energy and Climate Poli cy aims to accelerate the development of key 
low carbon technologies, so as  to bring them to the market more quickly than would 
otherwise be the case. 
This impact assessment aims to investigate, outline and recommend the specific measures 
which should be taken in order to finance the development and deployment of the low carbon technologies identified within the SET-Plan.  
2. S
UBSIDIARITY  
This section will outline the justificati on for EU intervention in terms of  
• Helping to attract needed additional finance 
• Helping to co-ordinate a range of fr agmented, disparate instruments.  
Financial Gap 
Low carbon technologies emerging into the Europ ean Energy market confront many market 
and regulatory failures. Above all low carbon t echnologies are beneficial largely because of 
their lower CO 2 emissions; but reducing emission is a public good suffering from severe 
environmental externalities that are not accounted for in the energy bill. Similarly basic research produces public benefits far outweighi ng the private gain to the research institute 
(spill-over effect). As a result, in neither cas e will the market provide the socially optimum 
level of funding; and therefore public intervention is justified. Other criti cal flaws hindering 
the development of low carbon technologies include:  
 
EN 3   EN – the high technological, regulator y and market risks which lead  to sub-optimal investment 
in low carbon technologies 
– a number of failures specific to the energy ma rket, in particular high transaction costs and 
barriers to entry; as well as limited comp etition, a fragmented regulatory framework for 
new infrastructural development, and the inhe rent inertia of the energy infrastructure. 
In order to combat these failures and achie ve our climate changes goals, the SET-Plan 
identified a number of strategic technologies which it aims to promote. An estimate of the 
additional financing required by eac h technology in order to attain the goals of the SET-Plan 
reveals that additional fi nancing of around 50 billion Euros will be necessary.  
Coordination Failures 
On the other hand, the barriers to achieving the obj ectives set out in the SET-Plan can be seen 
not only in terms of financing, but also in terms of the stru cture and co-ord ination of the 
available instruments. At present a wide arra y of instruments exist including both Research 
and Innovation programmes, and financial instru ments under the European Investment Bank 
Group. Yet, in many cases, general co-ordin ation and funding levels are inadequate; 
particularly with regards to large scale demonstration projec ts, and research and innovation 
programmes. 
Overall 
The transition to a low carbon economy is both necessary and beneficial for the community. 
Yet, given the complexity and level of effort required; few Member States have the capacity 
to bring about the required change. Furthermor e, significant EU level synergies exist with 
regards to the co-ordination of the various support schemes and the consolidation of the 
currently fragmented market. Action is n eeded, European level action would produce 
significant benefits above and beyond that whic h could be achieved by Member States acting 
alone, it therefore follows that action at EU level is justified. 
3. OBJECTIVES  
This impact assessment aims to examine the financial measures which might be taken in order 
to ensure the delivery of the objectives stated in  the SET-Plan. In light of the above these will 
include the following specific objectives: 
– To stimulate a substantial increase in priv ate investment in re search, technological 
development, demonstration, and market replication of SET-Plan technologies. 
– To ensure the provision of sufficient, appr opriate and efficient financial resources in 
support of the development of the low carbon t echnologies identified in the SET-Plan, so 
as to secure a level of innovati on in live with EU policy goals. 
Operationally this will involve  – At least a doubling of the fi nancial resources dedicated to  the SET-Plan technologies; 
– A more flexible and effective use of current instruments;  
 
EN 4   EN – The establishment (where appropriate) of new or modified instruments. 
4. POLICY OPTIONS  
In order to determine the most effective manne r in which these objectives might be achieved 
it was decided to split the alternatives into f our distinct policy options which illustrate and 
exemplify the full continuu m of choices available: 
(1) the continuation of the existing investment vehicles within the current institutional 
arrangements (BAU – Business as usual) 
(2) increased funding channelled through the exis ting investment vehicles within the 
existing institutional arrangements (option 1) 
(3) a strengthening of the existing investment vehicles within modified institutional 
arrangements (option 2) 
(4) new investment vehicles, taking specific institutional arrangements, filling in gaps and 
removing recurring weaknesses of  the existing portfolio of i nvestment vehicles (option 
3). 
Each one of these policy options constitutes a sp ecific, practicable way forward; and include 
suggestions pertaining to resear ch, innovation, debt, equity, and venture capital instruments. 
The conjunct of all four options together are viewed as sufficien t to illustrate and exemplify 
the alternatives available.  
5. ASSESSMENT OF IMPACTS  
Importantly, although measures sufficient to  obtain the objectives outlined above are 
considered necessary, it is acknowledged that  the overall Energy Policy (of which these 
actions form a part) may well come at a slight ov erall cost to society in  terms of GDP growth. 
These costs might be mitigated, however, or even reduced through full use of the 
complementarities which exist between the good implementation of these policies and the 
already existing emissions reduction mechanisms, particularly the Emissions Trading Scheme.  
It should be noted that, in terms of economic or social be nefits, while all policy options 
analysed are clearly superior  to the BAU option, the main difference between the policy 
options lies in the timing of the impacts rath er than their ultimate magnitude. The pace at 
which the expected environmental benefits ma y come to pass is linked to the speed of 
implementation of the SET-Plan. The different policy options will impact on the speed with 
which low carbon technologies ar e adopted, and therefore al so on total European CO 2 
emissions. 
 
EN 5   EN 6. COMPARISON OF POLICY OPTIONS  
Technology Grouping  
In order to perform a satisfactor y analysis the SET Plan technol ogies were divided into three 
groups, so as to better cater for the specificiti es and needs of each technology segment. These 
technology groups were: 
(1) Group I: Close to market competitiveness 1 
(2) Group II: Emerging technologies on the verge of mass market penetration2 
(3) Group III: New technologies3 
Assessment Criterion 
With regards to the specific po licies to be adopted, each of th e four policy options identified 
was analysed under a specific criterion, exam ining their character istics in terms of: 
• Mobilisation- ability to m obilise sufficient finance 
• Suitability- the degree to which the envisaged arrangements correspond to the 
requirements of the technologies concerned.  
• Flexibility- degree to which the envisaged arrangements ar e able to respond to changing 
situations. 
• Effectiveness- degree to which the envisage d arrangements impact on the European energy 
sector.  
Analysis and Conclusions 
In our analysis we (i) examined each of the f our policy options individua lly in terms of their 
overall strengths and weaknesses with respect to  each of the four crite ria (without making any 
effort to compare the options directly or taking any account of th e technology groupings); 
before (ii) separating the technologies into th eir three technology groups , and rating all of the 
policy options individuall y, under each of the four  criteria listed above. 
Our conclusion was that: 
• Policy option two, which included "a strengthen ing of the existing investment vehicles 
within modified institutional arrangements" was appropriate for all technology groups, and 
would constitute a strong way forward.  
                                                 
1 On-shore wind, solar heating, solar photovoltaics (c-Si), 1st generation biofuels, electricity networks 
(transmission), nuclear fission (G III+), combined  heat and power (CHP), energy efficiency in 
buildings, transport and industry. 
2 Offshore wind, solar photovoltaics (thin film), con centrated solar power gene ration, carbon capture and 
storage, 2nd generation biofuels, electricity networks (distribution). 
3 Nuclear fission - G IV, hydrogen and fuel cells, ocean energy, geothermal . 
 
EN 6   EN • Policy option one, which included increased fundi ng but little institutional change, could 
(due to its flexibility and immediate effectiv eness) be considered as a serious candidate; 
but was generally only adequate to support thos e technologies which were close to market 
competitiveness. 
• Policy option three would be suitable (due to its increased mob ilisation of funding, and 
ability to effectively co-ordinate inst ruments) for group three technologies.  
• The Business as Usual option would be severe ly inappropriate for all technology groups. 
It should be noted that these conclusions do not  rule out any hybrids of the different policy 
options groups; neither do they make any commen ts with respect to the manner or speed with 
which an implement might be introduced.  
Recommendations 
As a result it is our recommendation that resour ces be increased to the necessary levels and 
that the appropriate avenues for institutional chan ge be explored. That being said, the need for 
urgent action would suggest a rapid implementation of policy option 1 across the board, with 
a phased and targeted introducti on of the appropriate action s under policy options 2 and 3 
being introduced as a nd when appropriate.  
When formulating a strategy the following should be taken into account: 
• In many cases it might be appropriate to pursue a hybrid strategy borrowing alternatives 
from different policy options. 
• Many of the Group 1 technologies, and particular ly energy efficiency contain a short term 
potential, which might argue for an expedited full introduction of policy option 2. 
• With regards to Group 3 technologies, it should be noted that many of them already benefit 
from the kind of alternatives proposed under policy option 2. 
7. MONITORING AND EVALUATION  
The proposed financing effort will benefit from the SET-Plan monitoring and evaluation 
information system (SETIS), which has recentl y been established. SETIS is operated by the 
EU's Joint Research Centre (JRC), which se cures its independence and objectivity. In 
particular, the monitoring of financial research  investment in low car bon energy technologies 
will be done continuously and reported annually in  the Capacities Map published by SETIS.  
The impact of research financing on technol ogy development and deployment will be also 
closely monitored by SETIS on a continuous basis,  with its analysis publ ished bi-annually in 
the Technology Map. Accompanying this will be a review by SETIS of the specific 
technology developments performed under th e SET-Plan umbrella, whether through the 
European Industrial Initiatives or other programmes in the c ontext of the European Energy 
Research Alliance. This review will take place periodically and will be on the basis of Key 
Performance Indicators (KPIs), devised jointly  by SETIS and stakeholders as part of the 
process for the conception and definition of corresponding SET-Plan activities, which will 
address both the technology and the sector. Typically, KPIs will focus on both the costs and relative performance of technologies.