TABLE OF CONTENTS

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1........... Procedural Issues and Consultation of Interested Parties.................................................. 5

1.1........ Background in the development of the legislative proposal............................................... 5

1.2........ Organisation and timing................................................................................................... 6

1.3........ Consultation of the Impact Assessment Board (IAB)....................................................... 6

1.4........ Impact Assessment Inter-service Steering Group (ISG)................................................... 6

1.5........ Consultation and expertise.............................................................................................. 7

1.6........ Main stakeholder views on future policy options.............................................................. 7

2........... Problem Definition.......................................................................................................... 8

2.1........ Policy background.......................................................................................................... 8

2.1.1..... Aviation in the EU context............................................................................................... 8

2.1.2..... Clean Sky Joint Undertaking........................................................................................... 8

2.1.3..... Smart, Green and Integrated transport challenge under Horizon 2020.............................. 9

2.2........ What are the problems.................................................................................................... 9

2.2.1..... Aviation's environmental impact is growing...................................................................... 9

2.2.2..... EU Industrial leadership is threaten by increasing international competition...................... 12

2.2.3..... Current EU Public-Private Partnership in aeronautics needs improvements..................... 12

2.3........ What are the challenges................................................................................................ 13

2.3.1..... The aviation should reduce its future environmental impact............................................. 13

2.3.2..... European aeronautics' sector should remain a global leader............................................ 13

2.4........ Improving the environmental performance of aeronautics technologies is an extremely complex and long process.................................................................................................................................... 14

2.4.1..... Regulatory measures alone are not sufficient.................................................................. 15

2.4.2..... Aeronautics sector cannot rely solely on market mechanisms.......................................... 16

2.5........ EU level intervention brings added value........................................................................ 16

2.6........ Clean Sky achievements and need for improved framework........................................... 17

2.6.1..... Clean Sky attracts wide participation............................................................................. 18

2.6.2..... Clean Sky provides already first technical results........................................................... 18

2.6.3..... Clean Sky is on the track to achieve its environmental objectives.................................... 19

2.6.4..... Challenges with respect to operations and implementation.............................................. 19

2.6.5..... Challenges with respect to complexity and cost-effectiveness......................................... 20

2.7........ Baseline scenario.......................................................................................................... 21

3........... Objectives.................................................................................................................... 21

3.1........ Overall objective.......................................................................................................... 22

3.2........ Specific objectives........................................................................................................ 22

3.3........ Operational objectives.................................................................................................. 23

3.4........ Objectives relation to the problem statement.................................................................. 23

4........... Policy Options.............................................................................................................. 24

4.1........ Discarded options......................................................................................................... 24

4.1.1..... No EU funding option................................................................................................... 24

4.1.2..... Regulatory option......................................................................................................... 25

4.1.3..... No Public-Private Partnership....................................................................................... 25

4.2........ Business-as-usual option............................................................................................... 25

4.3........ Contractual PPP option................................................................................................ 26

4.4........ Improved JTI JU option................................................................................................ 26

4.5........ Analysis of the options.................................................................................................. 27

4.5.1..... Methodology................................................................................................................ 28

5........... Analysing the Impacts................................................................................................... 28

5.1........ Critical mass................................................................................................................. 28

5.2........ Small and Medium Size Enterprises............................................................................... 29

5.3........ Leverage effect............................................................................................................. 29

5.4........ Coherence.................................................................................................................... 30

5.4.1..... Coherence with Member State Programmes.................................................................. 30

5.5........ Innovation Impact......................................................................................................... 30

5.6........ Environmental Impacts.................................................................................................. 31

5.7........ Economic Impacts........................................................................................................ 32

5.7.1..... Macro-economic impact............................................................................................... 32

5.7.2..... Competitiveness........................................................................................................... 32

5.8........ Social Impact............................................................................................................... 33

5.9........ Cost effectiveness......................................................................................................... 34

5.9.1..... Cost neutrality and JTI JUs as effective means to achieve goals...................................... 34

5.9.2..... Possible improvements - efficiency................................................................................ 34

5.9.3..... Possible improvements - effectiveness........................................................................... 35

6........... Comparing the Options................................................................................................. 35

6.1........ Comparison of the options............................................................................................ 35

6.2........ Preferred option........................................................................................................... 36

6.2.1..... Scope.......................................................................................................................... 37

6.2.2..... Structure...................................................................................................................... 38

6.2.3..... Budget......................................................................................................................... 38

6.2.4..... Governance and organisation........................................................................................ 39

7........... Evaluation and Monitoring............................................................................................. 40

7.1........ Measurement of progress.............................................................................................. 41

7.1.1..... Evaluation levels........................................................................................................... 41

7.1.2..... Technical monitoring and evaluation............................................................................... 41

7.1.3..... Managerial monitoring................................................................................................... 41

7.1.4..... Financial monitoring...................................................................................................... 42

Annex I: Results from the public consultation on the preparation of the Clean Sky Joint Technology Initiative under Horizon 2020.......................................................................................................................................... 43

Annex II: European aviation key figures....................................................................................... 55

Annex III : Summary of the cost-benefit analysis of JU................................................................. 59

Annex IV: Executive summary of the preliminary report of the Impact Assessment Expert Group.. 60

Annex V: Technology Readiness Levels (TRL)............................................................................ 62

Annex VI: Clean Sky.................................................................................................................. 64

Annex VII: List of Clean Sky Demonstrators per ITD.................................................................. 66

Annex VIII: Statistics on Clean Sky calls..................................................................................... 70

Annex IX: Product Timeline Assumptions.................................................................................... 72

Annex X: Impact Assessment board opinion................................................................................ 73

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a COUNCIL REGULATION

on the Clean Sky 2 Joint Undertaking

1. Procedural Issues and Consultation of Interested Parties

1.1. Background in the development of the legislative proposal

1. Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December 2006 concerning the Seventh Framework Programme, provides basis for a Community contribution to the establishment of long term public private partnerships in the form of Joint Technology Initiatives.

2. In 2008, Council Regulation (EC) 71/2008 established the Clean Sky Joint Undertaking, a Public Private Partnership (PPP) between the European Commission and the Aeronautics Industry for a period up to 31 December 2017 with a budget of €1.6 billion, equally shared between European Commission and the European aeronautics industry.

3. The White Paper “Roadmap to a Single European Transport Area – Towards a Competitive and Resource Efficient Transport System”[1] stipulates that joint European efforts will bring the greatest European added value in areas such as clean, safe and silent vehicles for all different modes of transport, from road vehicles to ships, barges, rolling stock in rail and aircraft.

4. The Commission Communication "Partnering in Research and Innovation"[2] indicates that the partnering approach in PPP can help to address major societal challenges and strengthen Europe's competitive position by making the R&I cycle more efficient and shortening the time from research to market. It can also contribute to environmental and resource efficiency objectives. When the necessary commitment to partnering exists, Europe can excel in science and technology and achieve critical mass.

5. The Commission's proposal for "Horizon 2020"[3] provides a legislative basis for future EU PPPs in Research and Innovation. It stipulates that "Horizon 2020" may be implemented through PPP where all the partners concerned commit to support the development and implementation of research and innovation activities of strategic importance to the Union's competitiveness and industrial leadership or to address specific societal challenges.

6. According to the proposal, the PPP shall be identified based on the following criteria:

(a) the added value of action at Union level;

(b) the scale of impact on industrial competitiveness, sustainable growth and socio-economic issues;

(c) the long-term commitment from all partners based on a shared vision and clearly defined objectives;

(d) the scale of the resources involved and the ability to leverage additional investments in research and innovation;

(e) a clear definition of roles for each of the partners and agreed key performance indicators over the period chosen.

7. The Commission's proposal presents also a common set of rules for all initiatives supported under "Horizon 2020" in order to simplify participation, while leaving the necessary flexibility for individual initiatives to achieve their objectives, as well as ensure complementarity between the two Common Strategic Frameworks, for Research and Innovation and for Cohesion.

1.2. Organisation and timing

8. The present IA has been conducted including the following steps:

· Preparing a detailed roadmap and consultation plan.

· Setting up an inter-service Steering Group (ISG) in June 2012, to oversee the process (section 1.4).

· Setting up an independent expert panel in June 2012 to carry out an analysis of the current progress and assess the possible ways forward (section 1.5).

· Consulting interested parties through an open public consultation which ran from 11 July to 4 October 2012 (section 1.5).

· Setting up a hearing with the wider stakeholders’ community on the proposal for the Clean Sky extension in September 2012.

1.3. Consultation of the Impact Assessment Board (IAB)

9. The Commission Impact Assessment Board was consulted in February 2013 and following its opinion the present IA report was revised as follows. First the problem definition text was shortened and focused on the lessons learned from the current initiative. Second, the objectives were revised and its reasoning explained better. Third, the options analysis section was strengthened and its comparison was supported better by quantitative analysis. The difference between the options in terms of timing, effectiveness and efficiency was better presented. Finally, critical opinions of different groups of stakeholders were analysed and addressed[4].

1.4. Impact Assessment Inter-service Steering Group (ISG)

10. This Impact Assessment was elaborated by DG RTD. In this context, a Commission Inter-Service Steering Group (ISG) has been created in June 2012. It included DG MOVE, DG ENV, DG ENTR, DG ENER, DG CLIMA, DG COMP, SG, DG BUDG and Legal Service. Meetings have been held for all major steps in the development of the initiative. In relation to this Impact Assessment, the ISG met on June 8th 2012, July 20th 2012, September 20th 2012 and November 22nd 2012. The last IASG meeting took place on December 12th 2012.

1.5. Consultation and expertise

11. All stakeholders and enlarged community of industry actors were consulted through a public, web-based consultation conducted between July, 11th and October, 4th 2012 with 91 responses received (see Annex I for more detail). Additionally, individual position papers were issued by the main stakeholder associations (e.g. EREA of research organisations, EASN of universities, Member States and Associate States groups).

12. A hearing with the wider stakeholders’ community on the proposal for the Clean Sky extension was organised at a seminar at the ILA Air show on 12th of September 2012 in Berlin. The seminar conclusions and different opinions voiced are included in the public consultation report.

13. In addition, an independent expert panel was established by the European Commission with the objective to review the current progress and assess the possible ways forward. The expert panel included 5 experts in aeronautics, large EU programme management, as well as experts with socio-economic background and their report has supported the drafting of this Impact Assessment[5].

1.6. Main stakeholder views on future policy options

14. The key messages received from the actors during the public consultation were[6]:

Stakeholders, in general, underline the relevance of the aeronautics industry in addressing societal challenges in transport and the importance of the Aeronautical R&D to Europe in an increasingly competitive global market. Strengthen R&D infrastructure and associated skill base is considered as the key factor to achieve required technology advances necessary to support the sector. They stress the fact that it is impossible for the EU aeronautics sector to rely solely on market mechanisms to achieve major innovations. They highlight that public support is essential at all levels and consider appropriate to set up a Public Private Partnership in aeronautics under Horizon 2020.

Member States and public authorities consider that the Clean Sky JTI is proving to be a very effective and efficient instrument to mature and demonstrate promising greening technologies and innovations and they are supportive of the preparation of a future JTI within the coming Framework Programme Horizon 2020 while improving further and increasing the openness of Clean Sky activities.

Research Establishments consider that the Clean Sky Joint Technology Initiative has proven to be an important and efficient instrument for demonstration and are supportive to its continuation under Horizon 2020.

Universities find positive the overall experience from the participation of academic institutions in Clean Sky and support its succession.

2. Problem Definition

2.1. Policy background

2.1.1. Aviation in the EU context

15. The aviation sector is at the heart of the Europe 2020 strategy and its flagship initiatives including Innovation Union[7], an Industrial Policy for the Globalisation Era[8] and Resource Efficient Europe[9]. It has an important role to play in the further integration and growth of the enlarged EU and in the life of EU citizens being at the same time an important element in the reduction of the green-house emissions.

16. The White Paper “Roadmap to a Single European Transport Area – Towards a Competitive and Resource Efficient Transport System”[10] proposes concrete initiatives for the next decades aiming at, amongst others, increasing mobility and cutting carbon emissions. New technologies for vehicles and traffic management are recognized with high potential to lower transport emissions. At the same time, European Union launched the European Union Emissions Trading Scheme (ETS) with the objective to limit the amount of certain greenhouse gases and airlines will join the scheme. The aviation is also an important part of the EU Roadmap for moving to a competitive low carbon economy in 2050[11].

17. In parallel, recognising the evolving challenges facing the aviation sector, in 2011, the High Level Group on Aviation Research, established by the Commission, produced a new vision "Flightpath 2050"[12] for aviation following the objectives of Europe 2020 and of the Transport White Paper. This vision was developed in common agreement between major private and public players in the aviation sector in Europe in order to address the environmental and competitiveness challenges and proposes ambitious goals for a sustainable and competitive aviation sector for 2050. It is complemented by a new Strategic Research and Innovation Agenda (SRIA) of the ACARE (the Advisory Council for Aeronautics Research in Europe) and will guide and support future actions in public and private funding programmes along the common roadmap all over Europe.

2.1.2. Clean Sky Joint Undertaking

18. In 2008, the Clean Sky Joint Undertaking, a Public Private Partnership between the European Commission and the aeronautics industry, was established by Council Regulation (EC) 71/2008 for a period up to 31 December 2017. Its main objective is to develop environmental friendly technologies impacting all flying segments of commercial aviation, in order to contribute to the ACARE 2020 targets for reduction of emissions and noise in air transport in Europe. Clean Sky Joint Technology Initiative is a European research programme with a budget of € 1.6 billion, equally shared between the European Commission and the aeronautics industry, over the period 2008 – 2017[13].

19. In the Clean Sky programme 12 industry lekoaders, 74 associated members and more than 400 partners – out of which more than 40% are SMEs – are working together in a number of technology domains to address the common environmental objectives and to demonstrate and validate the required technology breakthroughs. All those technology domains have been integrated into 6 Integrated Technology Demonstrators (ITD) and a Technology Evaluator programme assessing the performance of the technologies developed under Clean Sky. Detailed description of the programme and the technical aspects is provided in Annex VI of this document.

2.1.3. Smart, Green and Integrated transport challenge under Horizon 2020

20. On 30 November 2011, the European Commission adopted the proposal for Horizon 2020, the new framework programme for research and innovation for 2014-2020[14]. The Societal Challenges pillar of the proposal includes the Smart, Green and Integrated Transport challenge which focusses mainly on three overarching objectives: resource efficiency, better mobility, global leadership for the European transport industry. These objectives are in line with the challenges the European aviation sector is facing.

21. The Commission proposal for Horizon 2020 underlines also the added value of achieving critical mass through partnering, and foresees greater impact of EU funding by combining Horizon 2020 and private sector funds within public-private partnerships in key areas. These partnerships, in particular in the form of Joint Technology Initiatives (JTIs), move away from the traditional case-by-case public funding of projects approach towards large scale research programmes dedicated to common strategic research targets. According to the proposal, JTIs launched under FP7 “may be continued using more fit-for-purpose structures”[15]. The Clean Sky JU is explicitly mentioned as one of the initiatives for which further support may be provided under Horizon 2020[16]. This added value is supported also by the Commission Communication "Partnering in Research and Innovation" which indicates that the partnering approach in PPP can help to address major societal challenges and strengthen Europe's competitive position.

2.2. What are the problems

2.2.1. Aviation's environmental impact is growing

22. Aviation[17] is an important sector for the European economy and society[18] but it contributes to climate change because aircraft release carbon dioxide (CO2) and nitrogen oxides (NOx) through the burning of fuels. Aircraft noise is also an important environmental issue, in particular for population close to airport areas and under the main arrival and departure tracks.

23. In 2009, the CO2 emissions from the aviation sector were about 7% of all the emissions produced by the transport sector and around 2% of total CO2 emissions in the world[19]. Its share is growing rapidly (by 87% between 1990 and 2006[20]) and the overall impact of aviation is estimated to be greater than Figure 1 indicates. On the other hand, due to the electrification of road transport, the share of aviation is expected to increase to 20-30% from all transport CO2 emissions in 2050[21].

Figure 1: Global man-made CO2 emissions

24. Over the last 30 years the aviation industry has reduced its environmental footprint threefold and is working actively to reduce it further (see Figure 2). An aircraft today produces 70% less CO2 than its equivalent 50 years ago and is 75% quieter than 30 years ago. This tendency is also kept for the future with International Civil Aviation Organisation (ICAO) targets including a global annual average fuel efficiency improvement of 2% until 2020 and an aspirational goal to continue improvement at this rate to 2050. Figure 2 shows the reduction of the aircraft energy intensity leading to reduction of CO2 emissions for the different models over the last decades.

Figure 2: Energy intensity of aircraft. Source IEA (2009)

25. Aircraft noise technology has also significantly improved over the last 40 years[22]. Today, several techniques are used in order to reduce the aircraft noise and its impact including use of new technologies and improved flight procedures[23]. As an example, the "noise footprint[24]" of the Airbus A300, introduced in 1974 is 4.17 km², whereas for the upcoming A350, it is anticipated to be in the 1-2 km² area. The next figure illustrates the technological advancement in terms of noise reduction over the last 50 years by plotting the cumulative aircraft noise relative to the ICAO Noise Standards[25] in effective perceived noise level expressed in decibels (EPNdB[26]) by year. The aircraft are grouped by engine bypass ratio (BPR), a key driver of overall aircraft noise.

Figure 3: Progress made in noise reduction at source since implementation of aircraft noise Standards - by engine bypass ratio (source ICAO, ICCAIA 2008)

26. Despite all the improvements in reducing the environmental impact of aviation, it is still growing due to the growth of the air traffic. According to the EUROCONTROL forecast, flights in Europe in 2030 will be 1.8 times more than in 2009, with an average growth of 2.8% per year in the ‘most-likely’ scenario. This growth will be even stronger outside of Europe with the global expected traffic growth estimated to be 4.8% annually over the next 20 years[27]. The next figure shows the increase of the world air traffic in revenue passenger kilometres (RPK[28]) since 1970 and provides an estimate until 2030.

Figure 4: World annual air traffic, 1970-2030 (source Airbus, ICAO)

2.2.2. EU Industrial leadership is threaten by increasing international competition

27. Today, the European aeronautics sector is one of the world leaders in terms of production, employment and exports. In 2010 Europe was the clear leader in terms of the number of transactions announced and Airbus, with revenues of US$36.6 billion in 2009, is the leader in the large commercial aircraft segment, closely followed by Boeing [29]. In the civil helicopter market, Europe is the global leader with players such as Eurocopter and Agusta Westland.

28. The world’s fleet of passenger aircraft with more than 100 seats is expected to grow from 15,000 at the beginning of 2011 to nearly 31,500 by 203027 and the business jet deliveries will reach 24,000[30]. At the same time, the global market will require 149,000 engines to be delivered over the 20 year period from 2012-2031 worth around US$975 billion[31].

29. Despite this leadership, the European aeronautics sector evolves in a complex international environment and the EU aeronautics industry is increasingly confronted with strong international competition from traditional or emerging competitors.

30. The US aviation industry is one of the main global competitors and US government strongly invests in aeronautics R&D. Today, the large commercial aircraft segment is marked by fierce rivalry between two players, Airbus and Boeing.

31. In the longer term, this duopoly is bound to be challenged as other actors and new entrants invest in development programmes - most notably Bombardier (Canada), Embraer (Brazil), Commercial Aircraft Company of China (COMAC China), and Sukhoi Civil Aircraft Company (SCAC Russia) as well as new competitors from Japan.

32. Annex II provides more detailed description on the international competition on the aeronautics sector.

2.2.3. Current EU Public-Private Partnership in aeronautics needs improvements

33. Given the specificities of the aeronautics sector, new developments require a scale of effect and continuity of purpose and often depend on effective cooperation between the public and the private sector. Therefore the decision concerning the FP7 ‘Cooperation’ specific programme identified certain aspects of the research agenda in aeronautics and air transport as requiring a Joint Technology Initiative[32] and resulted in establishing the Clean Sky Joint Undertaking (JU).

34. Since its establishment, the Clean Sky JU is successfully stimulating developments towards the strategic environmental targets as confirmed also by the expert panel of the interim evaluation of Clean Sky in 2010[33]. In 2010, the independent experts, performing the first Interim Evaluation, concluded that the concept of the JU is appropriate for its objectives and recognised a significant success and a number of achievements. These findings were furthermore confirmed by the Expert Panel established by the European Commission to review the current progress and assess the possible ways forward[34].

35. Despite these achievements, the experts also identified a clear need for improved operational and legal framework. In addition, the JTI Sherpas' group recognised in its report[35] the need to streamline the legal framework to make it fit for the purpose of setting up and implementing JTIs and PPPs in research in general in the future. They provided several operational recommendations in order to improve the efficiency and the manner the JTIs function. Chapter 2.6.4 and chapter 2.6.5 present detailed analysis of the challenges and the improvements for the PPP.

2.3. What are the challenges

2.3.1. The aviation should reduce its future environmental impact

36. The expected increase of the aircraft fleet in the next 20 years would lead to more intensive energy (fuel) use and higher growth rate in CO2 and NOx emissions. According to ICAO[36], estimated range of CO2 emissions will grow between 2.5 and 3 times in 2036 compared to 2006 in the most realistic scenarios (assuming advanced technologies and operational improvements). At the same time, the NOx emissions emitted at less than 3 000 feet above ground level are expected to grow between 2 and 2.5 times by 2036 compared to 2006. In terms of noise, the population exposed to significant aircraft noise will grow from approximately 21.2 million people worldwide in 2006 to between 26.6 million and 34.1 million people, depending on the scenario.

37. With such a forecast, emissions will increase significantly if no further measures are taken to mitigate the environmental impact at a rate equal or outweighing the effects of growing traffic levels. To this end, the cut of air transport emissions, in particular CO2 emissions, through drastic reduction of aircraft fuel consumption and innovation in green operations is essential to achieve reduction of this impact.

38. These environmental aspects are very important for the EU because the Union is at the forefront of international efforts in climate change mitigation actions, driving the strategic political agenda. The environmental aspects of aviation are also in the focus of international groups and organisations.

39. The public consultation related to the Impact Assessment also revealed that emission reduction and noise reduction are important challenges that European aeronautics sector will be confronted with in the following decades. It confirmed that reducing air transport environmental impact is a very important area where the EU level aeronautics research should be focused on.

2.3.2. European aeronautics' sector should remain a global leader

40. One of the challenges that EU industry is facing is to remain a global leader and keep the same market share in the frame of stronger competition and increased production. Europe is one of the leaders in the aeronautics sector today but in the current context of international competition this leadership is not guaranteed without sustained investment.

41. Break-through technologies will be required to secure future competitive advantage. In the current situation, technological capability and innovative potential of actors play a critical role and is becoming the major competitive differentiator, most notably in terms of energy and environmental performance.

42. In order to maintain its world leadership, EU aeronautics industry should provide competitive and high quality products and develop innovative fuel efficient technologies. In addition, high oil prices and economic measures, such as the inclusion of aviation in the EU Emission Trading Scheme, increase the necessity of a major leap in fuel efficiency.

43. The public consultation related to the Impact Assessment demonstrated that 79.1% of the respondents find that the strong international competition is a very relevant challenge that European aeronautics sector will be confronted in the following decades. It also indicated that 84.6% consider that EU level aeronautics research should be focused on the support of the industrial leadership of EU in the sector.

2.4. Improving the environmental performance of aeronautics technologies is an extremely complex and long process

44. The aeronautics industry is characterized by complex knowledge bases, and uncertainty in performance. A commercial aircraft comprises a wide range of components for propulsion, navigation, aviation, communication etc., that are already individually extremely complex but the interaction and integration of these systems is more complex and crucial to the performance of an aircraft. For this reason it is very difficult to predict the behaviour of a final product from design and engineering data, even with presently available computer-aided design techniques.

45. The development of new products in aeronautics is a complex, lengthy and costly process. The sector is characterised by extended lifecycles including long production complemented by long usage times of aircraft and consequently long maintenance periods[37]. The research, technology and product development phase from conception (TRL 1) to “fit-to-fly” (TRL 9)[38] is between 10 and 20 years presenting substantial financial investment and no incomes while the first positive cash-flow will come years after entry into service. Production and maintenance phases need also investment in new technologies because user requirements evolve during the prolonged lifetime of an aircraft design (Figure 5).

Figure 5: Indicative example of major civil aerospace programme lifecycle

46. The development requires a multidisciplinary approach and high level of cooperation between different partners with different expertise. It is characterised by very tight horizontal cooperation between actors with different expertise (materials, electronics, ICT, etc.) as well as between specific industry actors (design, manufacturing, maintenance and other service providers; academia and research institutes; end-users; public bodies such as certification agencies, air space management etc.). The research requires also important and expensive infrastructure for testing (e.g. wind tunnels, simulation tools, technology evaluators and test aircraft).

2.4.1. Regulatory measures alone are not sufficient

47. To incentivise the necessary development and introduction of green aircraft technologies, performance standards for aircraft emissions are set through regulations. There are already a number of regulations that constrain aviation emissions. Practically all aviation emission sources are independently regulated and legislation applies to products (i.e. environmental certification standards[39]), to local or regional fleet operation (e.g. noise dependent landing fees) or to a global fleet operation (e.g. ICAO, the International Civil Aviation Organization, imposes limitations on the aircraft noise and engine emissions through technical standards[40]).

48. The regulatory measures have proven to be a good incentive to reduce aviation environmental impact and EU has provided several regulations or certification rules ensuring mitigation of aviation environmental impacts[41]. In order to be effective, the regulatory framework should be streamlined to accelerate development and deployment of technologies that reduce environmental impact and to trigger new R&D efforts. Performance regulations should be flexible enough to avoid favouring a particular technology or particular market player and require research and determination of appropriate performance targets. At the same time they should be agreed and applied at international level in order to avoid distortion of competition. Therefore, in order to allow reaching ambitious objectives, the regulatory framework should be supported by extensive R&D effort.

2.4.2. Aeronautics sector cannot rely solely on market mechanisms

49. From an economic point of view, the aeronautics industry cannot address alone the technological challenge to reduce the environmental impact because of the expenses and the risks involved. There are several sources of market failure discouraging aeronautics research in the reduction of fuel consumption, emission and noise of future aircraft. The step changes required to implement the goals for greening of aviation can only be met effectively if a number of investments are put in place as part of a co-ordinated and innovative integrated multidisciplinary approach. Major areas of work have to cover the broad range of R&D work: aircraft (fixed wing and rotorcraft), engines, systems, and eco-design concepts able to deliver more environment-friendly aircraft production and operation.

50. On the other hand the social benefits of cleaner air travel cannot all be appropriated by the investing firms. As with the rest of the transport sector, the full environmental costs to society are not paid by operators or manufacturers. This negative externality represents a market failure that results in sub-optimal investment in, and deployment of, new environmentally beneficial technologies. Support to technological innovation is a key measure to reduce the extent of this negative externality all over the world.

51. Due to the specific aspects of aeronautics research, private companies have difficulties to mobilise the human and financial resources necessary to develop radical, game-changing technological advances. This effect is amplified in times of economic crisis when the investment community is placing a much lower value on high-risk endeavours than it has before.

52. The public consultation also indicated that 79.1% of the respondents strongly disagree that the EU aeronautics sector can rely solely on market mechanisms to achieve major innovations without public support. Therefore, there is a crucial need to address the different sources of market failure discouraging aeronautics research in the reduction of fuel consumption, emission and noise of future aircraft.

2.5. EU level intervention brings added value

53. Member States support the aeronautics industry via national programmes that directly increase or aim to foster R&D and innovation. Different EU Member States put in place aeronautics research funding mechanisms in order to support the aeronautics industry. Grants are the most common form of support, although some countries also provide loans as supplementary funds. Other support mechanisms include fiscal incentives, venture capital funds, repayable launch investment, etc. The majority of programmes have annual public calls with fixed deadlines.

54. An important characteristic of the national programmes is that funding is allocated at national level and programmes address individual national technology developments. However, the scale and scope of the research agenda for greening of aircraft go beyond the borders and the capacity of individual Member States, both in terms of the financial commitment and of the research capacity involved. National programmes are not able to address in full the major technological advances because of the Pan-European nature of the aeronautics industry[42] (specialisation in the manufacturing, geographical distribution…). There is also some overlap of similar research activities, as most countries are willing to keep and improve their national competencies in key activities of this strategically relevant sector. This may imply the positive effect of some competitive pressure between European countries, but this effect may also imply a duplication of funding and may prevent fast technological progress[43].

55. On the other hand, studies[44] show that inter‐firm collaboration is lower in the aerospace sector in comparison with other sectors of similar size. Fostering inter‐firm collaboration, especially in R&D, is a way to sustain competitiveness of the EU aerospace sector. Therefore, it is important to ensure that all relevant European stakeholders cooperate in developing and maturing the most promising key technologies towards full industry application.

56. According to the results of the public consultation, 84.6% of the respondents find that the EU aeronautics sector should receive support at all levels (regional, MS and EU) to achieve major innovation. There are 13.2% considering that the sector should be supported only at EU level, 1.1% only on regional level and no one considers that the support should be done only at Member States level. At the same time 94.5% consider appropriate to set up a Public Private Partnership in aeronautics under Horizon 2020.

57. The right for the EU to act in this field is provided by article 187 TFEU, which specifically authorises to "set up joint undertakings or any other structure necessary for the efficient execution of Union research, technological development and demonstration programmes".

2.6. Clean Sky achievements and need for improved framework

58. The Clean Sky programme, as established in 2008, provides ground for radical new technological concepts that would otherwise be beyond the manageable risk of the private sector. It gives the necessary financial certainty and stability to the aviation sector and investors to develop and introduce game-changing innovations in timeframes otherwise unachievable. A major strength of the programme is that it brings together the key actors from across Europe in order to implement a common agenda; it allows them to work together in a united manner and it avoids the fragmented approach.

59. According to the public consultation performed in the frame of this Impact Assessment, the respondents find that there is very much added value provided by Clean Sky to its objectives. 95.6% of the respondents consider that Clean Sky Joint Technology Initiative is an appropriate way to address environmental targets in aeronautics. The respondents consider that Clean Sky succeeded in addressing the key environmental targets in aeronautics research (93.6% of the respondents), in increasing European competitiveness in this area (91.2%), in bringing together main relevant stakeholders (92.3%) and in aligning them towards collaboration in large scale demonstrators (85.8%). Most of the respondents agree also that Clean Sky has organised a sound and transparent proposal evaluation system (72.6%) and that it effectively engaged with SMEs (74.8%) and with Public Research Organisations and universities (78.1%).

2.6.1. Clean Sky attracts wide participation

60. The first Interim Evaluation report of Clean Sky acknowledged that the programme was highly successful in attracting a high level and wide participation from all EU key industries and a large number of SMEs.

61. The report underlined that Clean Sky has led to new collaborations and the participation of new organisations thus enhancing European integration. The statistics from the Clean Sky calls show that 37% of the budget[45] is dedicated to SMEs and 59% of these SMEs have not been beneficiaries of EU-level Collaborative Research before.

62. By mid-July 2012, Clean Sky has already published 13 Calls for Proposals. Based on the evaluation of the first 11 calls published between 2009 and 2012, there are 339 projects selected, 664 participations (winning proposals) among 1911 proposals received and 413 unique participants from 24 countries. This translates into a success rate of 35% for Call for Proposals. The breakdown of the participation by type of participant is 37.3% of SMEs, 23.6% of Universities, 17.5% of Research Centres and 21.5% of Industry[46].

63. The main reasons of higher SMEs involvement in Clean Sky are the lighter project management structure (consortia may have less than 3 participants), reasonable financial exposure (95% of projects coordinated by mono-beneficiary SMEs are below 300k€ of budget), short time duration (19 months on average for projects coordinated by mono-beneficiary SMEs) and direct contact with end-users (SMEs are in direct relation with large companies and have the opportunity to demonstrate their ability to become a future supplier of the supply chain).

2.6.2. Clean Sky provides already first technical results

64. Although half way through, the Clean Sky started to provide already first results. Two open rotor engine demonstrators, a concept providing lower environmental impact than the conventional engines, have been successfully gone through initial testing in the Sustainable and Green Engines ITD. Main critical components were tested at component level and the first build of the open rotor demonstrator will be ground tested in 2015 and flight tested in 2016 on an Airbus A340-600.

65. In the Smart Fixed Wing Aircraft ITD, the Advanced Lip Extended Acoustic Panel, the technology to reduce the Fan noise of large turbofan engine was flown and validated in operational conditions in 2010 with an Airbus A380-800 aircraft. This test campaign brought significant data to help reach the last step of technological maturity and enable design fine tuning for potential implementation in the next generation of large commercial aircraft. Once finalised, this noise absorbing panel will enhance the acoustic performances of the engines and reduce the noise levels.

66. A flight test with Falcon F7X, which proved the technology to visualize laminar flow structure in flight by an infrared camera, was already performed in 2010. This was the first step to a low speed flight demonstrators of laminar flow wings planned on a Falcon test aircraft for 2014. This demonstrator should lead to a production wing design for a next-generation short- to medium range aircraft and will allow reducing the aircraft drag and consequently the fuel consumption.

67. A detailed list of Clean Sky Demonstrators per ITD is presented in Annex VII.

2.6.3. Clean Sky is on the track to achieve its environmental objectives

68. During the first Interim Evaluation the expert panel noted that although the gains achieved so far are difficult to quantify at this early stage of the programme, technical progress has been identified and the Clean Sky JU is successfully stimulating developments towards environmental targets.

69. In March 2012, the Technology Evaluator completed its first full-scale simulation and performed the evaluation of Clean Sky’s progress at all three assessment levels (Aircraft, Airport, and Air Transport System). The Technology Evaluator is a simulation tool that allows estimating the environmental impact of the Clean Sky technologies aircraft compared to Year-2000 reference aircraft and identify the progress towards the defined targets. The two other assessment levels (Airport and ATS), address the cumulative environmental impact over airport-related geographical areas and communities, and the global fleet and air transport system respectively. Preliminary results show that with research that has been started within the programme, the objectives of Clean Sky will be achieved. The programme has a potential to reduce CO2 and NOx emission by 20-40% depending on the aircraft type and bring significant noise reduction.

2.6.4. Challenges with respect to operations and implementation

70. Clean Sky demonstrates the benefits of a public private partnership and its technical content has provided a good balance for the public and private interests. The first experience with the programme shows that it is a good instrument to achieve ambitious goals in greening of the aeronautics, bringing stakeholders together and achieving jointly agreed roadmaps. Despite this success, the interim evaluation[47] panel recommendations, experiences with the programme and stakeholders' views[48] also demonstrated that several points need to be better addressed in the future.

· Improving the openness of CS activities – The possibility to have limited number of named beneficiaries is identified in in the basic act of Clean Sky and a number of associates is identified at an earlier stage of the programme. Currently, 50% of the budget goes to 12 Clean Sky leaders - industrial organisations committed for the full duration of the CSJU to perform and complete the programme. 25% of the budget is allocated to 77 associated members - private or public organisations having applied for and been accepted through a selection process as permanent members of the Clean Sky JU. Finally, 25% of the budget is dedicated to partners, selected following open Calls for Proposals issued by the JU. In order to increase the accessibility to all potential beneficiaries, it is recommended that all members are selected through open and competitive procedure.

· Increasing the share of funding through calls – Currently, 25% of EU funding for Clean Sky is dedicated for calls for proposals while the rest is distributed to the 'named beneficiaries'. This share needs to be increased compared to the current programme.

· Clear split of activities between the current and future programmes should be ensured in order to avoid allocation of additional budget to achieve the goals of the current programme. For this reason, the current programme should complete its activities and future initiative should implement a clear different technical programme.

· Strengthening the role of the Technology Evaluator. The Technology Evaluator (TE) should be kept and have a more independent role. Its governance structure should include a more balanced involvement of all stakeholders (Industry, Academia, Research Establishments). During the initial definitions of Clean Sky 2 the TE could be taken into account. The role of the TE should be expanded towards the whole aviation.

· Streamlining of activities – The Clean Sky activities should be streamlined towards achieving demonstrators and high TRL technologies.

2.6.5. Challenges with respect to complexity and cost-effectiveness

71. JTI JUs were set up as an innovative instrument under the 7th Research Framework Programme. The first experiences gathered with implementing the JTI instrument via the Joint Undertaking – own dedicated administrative structure – have highlighted a number of challenges with respect to complexity and cost-effectiveness, as noted by the Sherpa report[49], the JTI interim evaluation[50], and the CoA reports[51],[52] on JTIs.

72. These challenges are mainly the lack of suitability of the general legal framework to the specificities of JTI JUs, the lack of options for tailoring in the JU establishment act, statutes, staff and financial rules and the delegation of the overall responsibility for the day-to-day management of the JU to the Executive Director. These identified shortcomings stem from the initial design and constitute a starting point for an improved design for the Horizon 2020 JTI JUs.

73. The notable examples of the abovementioned shortcomings are:

· Lack of tailoring of legal framework. The legal framework governing a JU is essentially composed of four elements: the Council Regulation, the Statutes, the JU’s own Financial Regulation and the EU Staff Regulations. These are largely based on rules applicable to the European Institutions with little regard to the size of the JUs and nature of their activities. According to the interim evaluations of the JUs, this legal framework is not conducive to the efficient management of a small JU.

· Human resources. Due to the demanding legal and financial rules applying to the current JUs on the one hand, and the small overall size of the current JUs on the other hand, the structure of the JUs is one-sided when comparing administrative human resources with operational human resources: on average 50% of the JUs’ staff is dedicated to work on administrative tasks. This percentage is high compared to the 22% ratio of the somewhat bigger European Agencies, also set up as union bodies.

· Recruitment rules. Under current regulation, due to the fact that JTI JUs are Union bodies, their staff recruitment rules follow the EU Staff Regulation. Accordingly, when planning recruitment, the grades and functions of new staff must be foreseen in the multi-annual staff policy plan and the annual budget. These require approval from the Governing Board and the European Commission as well as compliance with the multi-annual planning cycle starting at end of year N-2. Therefore, the recruitment procedures take a significant amount of time and lack flexibility.

· Public procurement rules. The public procurement rules applied by the JU are similar to those used by the European Institutions. Moreover, the financial regulation does not permit a JU to conclude a Service Level Agreement (SLA) with another JU. Consequently, this prohibits the sharing of services between JUs in order to reduce costs (for instance, sharing the internal auditor function between two or more JUs).

· Delegation rights to the Executive Directors. Under the statutes governing the JU, the Executive Director is responsible for the day-to-day management of the JTI JU. While the financial regulation perhaps should give the authorising officer, i.e. the Executive Director, the overall responsibility for the financial management of the JU, their regulations require also the approval of the Governing Board - this delays decision-making. As a consequence, recurrent administrative decisions are brought up to the level of the Governing board, thus hampering its focus on strategic issues.

· The funding and participation rules applied to/by JTI JUs as compared to mainstream FP7 legal and financial framework result in different and often lower funding rates for participants in JTI JU managed projects than collaborative research, which compromises the accessibility (new rules have to be learned) and attractiveness (funding rates are lower) of the JTIs.

· Availability of resources prior to start. The Interim Evaluation panel advised that for future JTI prior to the formal start of technical activities, the resources and administrative tools should be essentially available and that an in-depth review of the technical programme is carried out.

2.7. Baseline scenario

74. The baseline scenario is to implement the JTI in aeronautics renewing the current Clean Sky initiative with the necessary adaptations to comply with the context of Horizon 2020. This baseline scenario is based on a status quo where no specific improvements would be made to the initiatives, neither in scope nor in governance/operating rules.

75. The renewal of the current initiative would continue to address the need reducing Europe's greenhouse gas emissions in aviation in line with the new objectives by integrating, demonstrating and validating the most promising technologies. However, this scenario will not be able to achieve simplification in the administration and introduce additional flexibility as foreseen by the new Horizon 2020 rules. Moreover, it will not allow addressing integrated technology demonstrations at large system level. Together with the later start (new technologies will be developed once the current programme is finalised), highly performing and mature enough technologies will not be ready for integration in next generation of aircraft by 2025-2030.

3. Objectives

76. The expected increase of the air traffic and the aircraft fleet in the next 20 years would lead to more intensive fuel use and therefore significant increase of emissions. In order to mitigate these environmental impacts at a rate equal or outweighing the effects of growing traffic levels additional measures are required to be taken allowing technological improvements of aircraft fuel efficiency.

77. Furthermore, these measures should allow the EU aeronautics industry to maintain its competitiveness and world leadership in the sector. The European Industry, which accounts today for c.a. 40% of the global civil aircraft market, must maintain its competitiveness to benefit from the global need for 70 000 new aircraft (40 000 fixed wing aircraft and 30 000 rotorcraft) in the next 20 years[53].

78. According to the current fleet replacement strategy, the replacement for ‘single aisle’ aircraft is likely to be in the 2025-2030 timeframe[54]. The research on new fuel-saving technologies and completion of technology demonstrators should be synchronised in time with the expected new fleet replacement and the results of the research phase should be completed by 2020-2025. The timely delivery of matured technologies is essential. Due to the long and costly development cycles in aeronautics the time between two generations of aircrafts is typically 10 to 15 years and the introduction of the technologies, which are not mature for the entry into service of the new aircrafts will be postponed.

79. In order to mitigate the traffic increase, the new technologies should provide better environmental performance than the usual pace. The typical improvement in fuel efficiency and therefore in emission reduction in the sector is 10-15% for a new generation of aircraft and all efforts should be made to accelerate this rate. A 20 to 30% improvement could result in ‘skipping a generation’ of nominal development and will have an important positive impact on environment.

3.1. Overall objective

80. Based on the assessment of the problem and its root causes, the general objective is to improve the environmental impact of European aeronautical technologies in order to:

· contribute to the achievement of the objective of reducing Europe's greenhouse gas emissions;

· secure the future international competitiveness of the European aeronautical industry.

81. The main rationale is to enhance the competitiveness and environmental performance of European aeronautics technologies in line with the objectives of Europe 2020, Transport White Paper and Horizon 2020 Smart, Green and Integrated transport challenge.

3.2. Specific objectives

82. The aim of the proposed initiative is to integrate, demonstrate and validate the most promising technologies capable of:

· increasing aircraft fuel efficiency and reducing CO2 emissions by 20 to 30% compared to "State-of-the-art" aircraft entering into service as from 2014[55]

· reducing aircraft NOx emissions by 20 to 30% compared to "State-of-the-art" aircraft entering into service as from 2014

· reducing aircraft noise emissions levels by up to 5 EPNdB[56] per operation[57] compared to "State-of-the-art" aircraft entering into service as from 2014

3.3. Operational objectives

83. The operational objectives of the initiative are:

· To establish a strategic innovation-driven agenda for industry aimed at tackling the problem identified

· To pool and coordinate R&D public and private investment bringing together the key actors from across Europe in order to implement this agenda

· To enhance the exchange of knowledge between actors and disciplines

· To gather the necessary critical mass of resources needed to set-up large scale system-level demonstrators to validate the research results

· To improve mechanisms and pathways for the more rapid commercial exploitation of results

· To ensure the efficient and flexible management of funds, including the systematic monitoring of progress and concrete results

· To ensure a high degree of SME participation

3.4. Objectives relation to the problem statement

84. Next figure shows how the objectives are mapped onto the problem statements and their drivers.

Figure 6: Schematic representation of the problem and objectives relationship

4. Policy Options

85. Based on the problem definition and the objectives, the three main policy options are identified in line with the Horizon 2020 instruments, namely implementation via collaborative research projects complemented by the Public-Private Partnerships.

(a) Business as usual – current Clean Sky programme extended under Horizon 2020 (BAU)

(b) Establishing a contractual PPP to implement new programme (cPPP)

(c) Establishing a new Joint Technology Initiative (JTI) to implement, through an improved Joint Undertaking, a new programme (CS2)

4.1. Discarded options

4.1.1. No EU funding option

86. The No EU funding option consists of discontinuing public support for research and innovation in aeronautics at European level.

87. Horizon 2020 Impact Assessment tackles already the no-EU option[58] and recognises the need to continue with the research and innovation in transport. The proposal for Regulation establishing the Horizon 2020 Framework Programme proposes a Smart, Green and Integrated Transport challenge to be addressed. Therefore, this option is contradicting the provisions of Horizon 2020 recognizing the need to include EU level research and innovation in air transport in its framework and is not analysed further.

4.1.2. Regulatory option

88. The regulatory option addresses the elaboration of regulations setting performance levels for aircraft emissions.

89. The regulatory measures to incentivise the necessary development and introduction of green aircraft technologies are discussed in chapter 2.4.1. Such measures are proven to be good encouragement in aviation but because of the need for global agreement before application and the need for ambitious but appropriate and competitive performance targets, it is considered that this option will not allow reaching ambitious objectives in the aviation sector in a given timeframe without extensive R&D support. Therefore the regulatory option is not addressed in details in this document.

4.1.3. No Public-Private Partnership

90. This option uses focussed (Level 1) and integrated (Level 2) collaborative projects[59] only. The current Clean Sky programme defined under FP7 ends its activities in 2017 and no new Public-Private Partnership in aeronautics is set up under Horizon 2020. All running projects will continue to be supported in the frame of the current JU between 2014 and 2017.

91. The traditional instruments of collaborative research effectively stimulate basic research and validation at the sub-system or system level and can provide a good progress in developing a wide range of new and greener technologies at lower TRL levels. However, in order to stimulate industry on long term and large multidisciplinary investment, with high risk and low profitability, it is important that the research programme should include the demonstrators needed to validate technologies at Technology Readiness Level 6 (TRL 6), which is the level preceding the system prototype demonstration in an operational environment.

92. Due to its fragmented approach and lack of synergies between research actors as well as its absence of long term commitment and defined research agenda, the collaborative research is not well suited for large-scale demonstrators integrating and combining several new technologies and systems. The sum of focussed research projects in the Framework programme will not guarantee maturation and validation of specific technologies on time and this would result in a significant delay in delivering all the research results needed including the large scale demonstrations.

93. Implementation through a set of smaller projects instead of with one large-scale integrated demonstrator programme may cause at least 10 years delay in reaching final technology maturity (TRL 6) allowing to launch new products. Such a delay will miss the opportunity to include these technologies in the next generation of aircrafts before their entry into service in 2025-2030. Because of this reason, the no Public Private Partnership option was assessed as sub-optimal to pursue the objective of accelerating the development of clean air transport technologies in the EU for earliest possible application and therefore excluded from further analysis.

4.2. Business-as-usual option

94. This option (BAU) considers the continuation of the current Clean Sky Joint Technology Initiative under Horizon 2020, managed by the Clean Sky Joint Undertaking. The Clean Sky JU will extend its activities under the different ITDs to achieve the objectives set up in Chapter 3. The option will use the current allocated budget to finalise the current activities by 2017 and an overall budget from Horizon 2020 will be allocated for the period 2018-2020.

95. The business-as-usual scenario (BAU) relies on the continuing of the Clean Sky JU under Horizon 2020 as it currently exists under the 7th Framework Programme, i.e. retaining its implementation arrangements (governance, financial rules, funding rules, etc.), in particular:

· Regarding the governance structure – same division of powers and responsibilities between the Executive Director, the Governing Board, the Commission, and the private participants;

· Regarding the financial rules – same (updated) financial legal framework without additional flexibility for the needs of the JTI JUs;

· Regarding the funding rules – the funding and participation rules would continue to diverge from the mainstream rules under Horizon 2020

· Regarding the technical activities – the six Integrated Technology Demonstrators (ITDs) will be kept, together with the Technology Evaluator in order to deliver technology demonstrators in all segments of civil air transport. The programme will benefit from Horizon 2020 budget and extended timeframe (up to 2025) to mature further the initially identified technologies beyond the status achievable in the current Clean Sky timeframe (until 2017). Technologies developed are demonstrated at the best available integration level within Clean Sky ITDs i.e. at component (e.g. full engine, scale one structure, etc.) and not at aircraft level.

4.3. Contractual PPP option

96. This option (cPPP) aims to establish together with industry a common programme to achieve the objectives set up in Chapter 3. This programme is implemented through a contractual Public Private Partnership (contractual PPP) using the Framework Programme collaborative research and innovation projects managed by the Commission services or an Executive Agency. The current Clean Sky programme set under FP7 ends its activities in 2017 as initially programmed.

97. The contractual PPP is set-up via contractual agreements between the Commission and private partners, following a Commission Decision. Private partners develop the multi-annual roadmap and their own commitment is set out in the contractual agreement. The private partners have an advisory role and they cover their own costs of internal governance.

98. The implementation of the contractual PPP relies on annual budgets subject to an annual decision of the European Parliament and the European Council. An overall tentative budget for the period 2014-2020 is earmarked.

99. Annual or multi annual work programmes are proposed by the Commission and topics relevant to the objectives set-up in Chapter 3 are developed based on the advice by the private partners which can include proposals for the annual priorities. Member States are consulted. The industry and research stakeholders do not formally decide on the content of the work programmes.

4.4. Improved JTI JU option

100. Similar to cPPP, this option (CS2) establishes a new programme in the form of Joint Technology Initiative (JTI) implemented by a Joint Undertaking (JU) to achieve the objectives set up in Chapter 3. An overall budget for the period 2014-2020 will be set by the Council Regulation establishing the Joint Undertaking. In establishing the new JTI, the current Clean Sky programme, set under FP7, will end its activities in 2017 and smooth transition of results and operations will be ensured.

101. The "improved JTI JU" option builds upon the past experience and the lessons learned and it further improves the design and suitability of the instrument to the new challenges under Horizon 2020 by simplifying the administration, introducing lighter financial procedures, exploring possibilities of establishing common services/functions, and increasing stakeholder commitment to the JTI. In technical terms, the option is centred on the continuation of Clean Sky efforts, addressing integrated technology demonstrations at large system level, and building upon Clean Sky achievements, including new configurations and new vehicle demonstrations at the integrated vehicle level. The new initiative enlarges the scope of demonstration to a wider set of technologies and introduces further integrated demonstrations and simulations of several aircraft systems at the aircraft platform level.

102. The "improved JTI JU" keeps the basic elements of an EU body: legal status, application of the Staff Regulations, application of the Protocol on Privileges and Immunities, liability, jurisdiction and applicable law, protection of the financial interests of the Members, rules on confidentiality and transparency; it also keeps basic elements of the Statutes such as the JU bodies and their responsibilities;

103. At the same time the "improved JTI JU" simplifies a series of other important elements: reference to the PPP-specific financial rules (new, tailor-made, simplified "model" financial regulation), harmonized provisions on control and audit, application of the Horizon 2020 rules subject to derogations where appropriate, set-up under the responsibility of the existing JTI JUs, no mandatory host agreement, streamlined financial and operational planning and reporting, and harmonized approach to internal audit.

104. In the future legal environment tailored-made for the JTI JUs, the "improved JTI" could contribute to: expanding the objective and activities of the JTI JUs in view of Horizon 2020, extending the current programmes, improving their shared governance, providing a stable long term perspective to the stakeholders and simplifying the administration and operations of the JTI JUs.

4.5. Analysis of the options

105. The three remaining policy options identified – BAU, cPPP, and CS2 – were compared along a range of key impacts and criteria selected for their relevance in assessing public intervention in aeronautics research and innovation. The comparison along these parameters was carried out in an evidence-based manner using a range of quantitative and qualitative evidence, including:

· ex-ante and interim evaluations,

· reviews of academic literature (e.g. on market and systemic failures, the impact of research and innovation, the impact of public funding for research and innovation)

· econometric modelling and sectorial competitiveness studies,

· vision papers and foresight studies,

· analyses of science, technology and innovation indicators,

· statistical analyses of FP implementation and participation data,

· public consultations and expert hearings.

4.5.1. Methodology

106. It is estimated that the Clean Sky 2 option will be able to achieve the objectives set in chapter 3 by 2025. The other two options will require longer time to achieve the same performance level. The BAU option will require 3 to 4 years more because of the later start (in 2017, only when the current programme finishes) and because of the need for system integration. The cPPP option will require at least 7 years more because of the nature of its implementation (more fragmented projects, annual budget adoptions) and because of the lower commitment from industry. However, in order to have some positive impact on environment and competitiveness, the developed technologies should be introduced in the next generation of aircraft.

107. The methodology to analyse and compare the impacts of the different options is based on the effect of the technologies introduced in the new generation of aircraft. Only mature technologies reaching TRL 6 at latest in 2025[60] will be introduced. Any other technology is considered to be delayed for later generations by 10 to 15 years and its effect will be minor for short terms.

108. Depending of the level of maturity and number of technologies introduced in new generation aircraft, every option will bring different emission reductions. The next table presents the improvement in performance levels for each option. These levels are computed based only on technologies developed and matured enough by 2025 and ready to be introduced in new generation aircraft. The estimations are based on the experts' view of technology development timescales and pragmatic current of new aircraft timing for each option.

|| BAU || CS2 || cPPP

CO2 reduction || 10-15% || 20-30% || 8-10%

Fuel reduction || 10-15% || 20-30% || 8-10%

NOx reduction || 15–30% || 20-40% || 10-30%

Noise reduction (in cumulative EPNdB) || -2dB || -8dB || -2dB

5. Analysing the Impacts

5.1. Critical mass

109. The current Clean Sky programme has achieved critical mass bringing together all partners and complementary knowledge resources required to achieve its objectives. In total, more than 500 participants take part in the programme and more half of the beneficiaries are newcomers in European funded research programmes. At the programme level Clean Sky addresses a broad portfolio of relevant technologies and the programme covers the full scope of activities, required to accelerate the development and introduction of major technological advances.

110. Continuation of the current programme (option BAU) will have a positive impact in terms of critical mass. The contractual PPP option (option cPPP) has the advantages of the PPP to strengthen the synergies between researchers and industry but due to the annual decisions on budget and advisory nature of the multi-annual roadmap this option does not give necessary assurance for industrial investment and is considered less favourable than the JTI. The CS2 option, similarly to the BAU option, has the potential to assemble necessary critical mass because it offers long-term commitment for funding and for the scope of the programme. It presents also an advantage compared to BAU option because of the higher degree of integration and/or increased openness and therefore brings more actors together.

5.2. Small and Medium Size Enterprises

111. The aeronautics industry today is mainly dominated by large manufacturers but there are many smaller companies that support the big companies and can have an important impact. The SMEs have a significant involvement in the supply chain and may benefit from the all different options presented. All the proposed options are in line with the Rules of Participation for Horizon 2020 and do not introduce any distortions that impact disproportionately on the SMEs products.

112. Based on the experience with the current Clean Sky programme, the option BAU will have high positive impact on the SMEs. The natures of topics in the JTI (small enough, precisely defined, closer to market) and its specific rules (proposals may be submitted also by individual entities) make it easier and more attractive for SMEs to apply than the traditional Framework Programme collaborative projects in aeronautics requiring forming a larger consortia. As demonstrated in chapter 2.6.1, because of these particularities, the programme involves a high number of SMEs (ca. 40% of Call for Proposals beneficiaries are SMEs) and the budget from the open calls allocated to SMEs is significantly higher than in the FP7 aeronautics programme. Moreover, as more than half of these SMEs are new participants, it widens the participation, their know-how brings additional added value and improves the exchange of knowledge process.

113. The cPPP options will have also positive impact on the SME because the European Commission is paying special attention to the funding for SMEs under the Framework Programme collaborative projects. In average 15% funding was allocated to SMEs in Aeronautics and Air Transport topics during the FP7 and these options are expected to be even more beneficial for SMEs in Horizon 2020, building on the simplification of procedures.

114. The CS2 option is expected to have the same impact on the SMEs as the BAU option because of the nature of topics in the JTI and its specific rules.

5.3. Leverage effect

115. Public funding is generally expected to have a positive leveraging effect on private research budgets. This effect is two-fold. On one hand it links to additional research carried out by the private sector in parallel and on the other hand the additional research and development investment private carries out alone after the programme completion.

116. The BAU option produces strong leverage effects. The current Clean Sky Joint Technology Initiative mobilises about €800 million in private in-kind contributions which is 50% of the total budget of the initiative and roughly represents a leverage factor of 2 on top of the Framework Programme funding leverage effect. The total effect is higher taking into account that the JTI triggers focused R&D activities at industrial level complementing its activities. It encourages also investment after its completion for technologies which are mature enough to be included in privately funded development programmes leading to new products. The ratio of investment between Research and Development programmes in aeronautics is estimated to be at least 1:10.

117. The contractual PPP option (cPPP option) will provide slightly lower effect than the BAU option because even if increased by the direct private participation the lack of long-term stability will affect negatively the private commitment. Moreover, due to the applicability of the Horizon 2020 rules, the funding rates the private contribution will be less than 50% and therefore the leverage effect will be lower than the BAU option.

118. The effect of the CS2 option is similar to the BAU option. The foreseen Clean Sky 2 budget is complemented by higher private investment in research and acts as the catalyst for substantial investment in new generations of green aircraft, engines, and systems by bringing high maturity level innovative and integrated technologies.

5.4. Coherence

5.4.1. Coherence with Member State Programmes

119. In terms of coherence with Member State programmes, all the proposed options will assure such coherence because of the participation of Member States in the activities. However, the options BAU and CS2 permit a more stable participation because of the long-term character of the Strategic Innovation and Research Agenda, strong industry commitment and as the Member States are directly involved through the advisory committee that serves as a relay for information exchange. In addition, the participation of industrial, national and regional representatives in the definition of the programme assures a maximum level of synergy through their contribution and through the feedback they will provide to their national and regional authorities.

5.5. Innovation Impact

120. The PPPs are better able to accommodate the various aspects of implementing sustained, large-scale and complex research and innovation activities and thus have better potential to achieve the expected innovation impacts and the specific objectives formulated. The unique contribution from PPPs is that they help transferring new technologies from lab into products. It enhances the productivity of public R&D investments and generates an increased number of lower-risk/higher-quality opportunities for the private sector investment.

121. The effectiveness of the current Clean Sky programme in terms of innovation impacts is confirmed by the results from the JTI Interim Evaluation which found that the CSJU is successfully stimulating developments towards environmental targets.

122. Taking into account these aspects, the BAU option will provide a number of technologies that will have achieved sufficient maturity to become available for inclusion in demonstration and development activities for future aeronautics products. The cPPP option will have positive impact but lower than the JTI options (BAU and CS2) due to the nature of the implementation of the objectives and because the progress on demonstration projects is bound to the availability of annual budgets. Finally, the CS2 option will have similar impact than the BAU option going even further by reaching quicker novel technological advancements.

5.6. Environmental Impacts

123. The environmental impact of the different options is computed based on the assumption of readiness of the developed technologies at the end of the programme and their maturity to be integrated in the next generation of aircrafts.

124. The continuation of current Clean Sky programme (option BAU) will have a positive impact on environment building on the achievements in its initial phase (until 2017). However, because of the later start of developing new technologies (after the finalisation of the current programme) and because these technologies will require further work on integration and maturation only some positive impacts will be additive to each other. The benefits achieved in terms of CO2 emissions as a sum of different technologies are estimated to lead to maximum of 15% reduction of CO2 compared to “State-of-the-art” aircraft.

125. Executing the new technological programme through a contractual PPP (option cPPP) will provide a good progress in terms of developed technologies. The necessary technological breakthrough will be more difficult and slower to achieve than for BAU and CS2 option. The main reason is that the possibilities to launch individual projects to implement the programme are subject to annual budget and work programmes decision of the Commission and Member States. Each year only a pre-defined number of projects can be launched and therefore the technological developments are expected to be slower than needed for reaching the objectives set in Chapter 3. In this sense, the benefits achieved in terms of emission are estimated to be 8 to 10% reduction of CO2 compared to “State-of-the-art” aircraft.

126. The establishment of a new dedicated programme (option CS2) bears the highest potential to integrate and validate timely the novel technologies at higher, system level and therefore significantly contribute to the environmental and societal challenges. Building, where relevant, on Clean Sky technologies, increasing the maturity levels of technologies up to full TRL 6 and raising them to a higher level of integration, the expected achievements would allow to achieve at least 20% CO2 reduction and enable substantial environmental savings in the next generation.

127. The following table presents the CO2 saving potential by 2050 computed using the readiness of the developed technologies in each option at entry into service and based on experts estimations. The improvement of each option is compared to the estimated levels of emissions in 2050 resulting from the traffic increase and reduced only by the usual performance improvement.

Aviation emissions (in 2010) || || 700 MtCO2

Demand growth 2010-2050 || || 4.5% per annum (p.a.)

Assumed performance improvement || Narrowbody || 0.6% p.a.

|| Widebody || 0.56%

Assumed % of fleet total fuel burn || Narrowbody || 51%

|| Widebody || 49%

Normal fleet rollover period || || 25 years

Options improvement || || BAU || cPPP || CS2

Narrowbody (EIS 2025) || 14% || 8% || 20%

|| Widebody (EIS 2030) || 18% || 10% || 25%

CO2 avoided (in tonnes) || || ~3 bn || ~1.5 bn || ~4 bn

NOx avoided (in tonnes)[61] || || ~15 mln || ~7.5 mln || ~ 20 mln

5.7. Economic Impacts

5.7.1. Macro-economic impact

128. On a macroeconomic scale Clean Sky (option "business as usual") will contribute to the economic growth of Europe as the European air transport industry generates 3.1% of the European GDP directly and supported 5.1 million jobs in 2010 in Europe[62]. In addition, due to the growth forecast in the air transport industry, this contribution is growing. Therefore this option will impact not only the aviation industry, but it will have a positive effect on the whole European economy. It also contributes to the generation of new jobs through the better performance of the industry with more successful products and resulting higher demand.

129. Establishing of a contractual PPP (option cPPP) will have a substantial economic impact, in particular for creation of new jobs and supporting the EU growth but it is expected to be in a lesser extent than for options CS2 and BAU. This is due to the delay in reaching the final technology maturity (TRL 6) for needed technologies caused by the implementation modalities of a contractual PPP – projects leading to demonstrators are implemented consecutively depending on the availability of annual budget and the full aircraft level demonstration is postponed.

130. The impact of the CS2 option is expected to generate more benefits for the European aeronautics industry than the BAU option as it will also address new technologies and will reach full system integration. Using methodology taking into account the forecast for aircraft sales, traffic growth expectations, the age of the existing fleet and the predicted technology improvements, the market opportunity related to these programmes is estimated to be around €2000 Bn. The direct economic benefit is estimated at around €350-€400bn and the associated spill-over is of the order of €400bn. These figures are additive with respect to the remaining (although slightly reduced) Economic Value Added still expected from Clean Sky.

5.7.2. Competitiveness

131. The competitiveness of the European aviation industry strongly depends on the quality of products it delivers and in particular on the fuel efficiency of the proposed technologies. Today, the fuel efficiency is the major competitive differentiator and the constant high fuel prices will drive the demand for more efficient aircraft in the future. On the other hand, the pressure to introduce new aircraft more frequently may rise with the increase of the competition and with other airframers entering the market. For these reasons, the timely introduction of new fuel efficient technologies is the main factor driving the competitive capacity in the sector.

132. For the purpose of this impact assessment and due to the lack of precise data, it is considered that the fuel efficiency and the maturity for introduction of the developed technologies in the new generation aircraft may be used as a measure for the impact on competitiveness.

133. Technologies developed in BAU option will contribute to the design of new cleaner aircraft providing around 15% of reduction of fuel consumption for the entering of service of the new aircraft generation. The cPPP option, on the other hand, because of the slower development, will provide only 8 to 10% increase in fuel efficiency and therefore its impact is expected to be lower than the BAU option. The 5 to 7 years delay in the maturation of the technologies is due to the implementation modalities of a contractual PPP – projects leading to demonstrators are implemented consecutively depending on the availability of annual budget and the full aircraft level demonstration may be postponed.

134. The CS2 option provides the highest performance and market potential of the validated technologies – 20 to 30% fuel efficiency – compared to 15% in BAU and 10% in cPPP. The development of technologies integrated at system level addressing environmental goals will greatly enhance EU industry competitiveness, since greater energy efficiency will imply reducing operating costs and result in higher demand.

5.8. Social Impact

135. The development of new less polluting air transport has important social impacts such as positive influence on quality of life, public health, mobility, creation of new jobs and contributes to economic prosperity. The World Health Organisation (WHO) and the Joint Research Centre of the Commission a report[63] published in 2011 estimating the healthy life years lost in Europe due to environmental noise. It shows that traffic-related noise may account for over 1 million healthy years of life lost annually in the EU Member States and other Western European countries. It depicts the link between exposure to aircraft noise and hypertension, ischaemic heart disease and the risk of high blood pressure. Another report from the WHO indicates that transport-related air pollution, affects a number of health outcomes, including mortality, non-allergic respiratory morbidity, allergic illness and symptoms (such as asthma), cardiovascular morbidity, cancer, pregnancy, birth outcomes and male fertility. Transport related air pollution increases the risk of death, particularly from cardiopulmonary causes, and of non-allergic respiratory symptoms and disease.

136. It is difficult to quantify exactly the impact of the different options on public health because the accuracy of the proportion of diseases attributable to aircraft emissions and noise is hard to specify. However, it is clear that reduction of CO2 emissions and noise levels will provide a direct positive effect on public health. In this sense, the reduction of those emissions may be adopted as a measure to understand the effect of the options on public health.

137. As assessed earlier, BAU option is expected to provide 10 to 15% reduction of CO2 emissions, the cPPP option 8 to 10% less CO2 and CS2 option 20% less. Regarding the noise level reduction the BAU and the cPPP options will bring 2 dB noise reductions while the CS2 option will provide 8 dB. In this regard, the CS2 option may be considered as the most favourable in terms of effect on public health.

138. In terms of number of jobs, the CS2 option is estimated to provide in the order of 600 000 (direct and indirect jobs) supported by the development, manufacture and support of Clean Sky 2 technology taking into account the accessible market opportunity. This estimate is based on a jobs per unit of economic activity ratio developed by the UK aerospace industry and used with the British Government. The BAU option and the cPPP option will provide both about 100 000 to 150 000 jobs less.

5.9. Cost effectiveness

5.9.1. Cost neutrality and JTI JUs as effective means to achieve goals

139. The first experiences with the JTI JUs indicate that they constitute a highly effective means of implementing the 7th Research Framework Programme.

140. The use of a JU to implement the JTI has the following main benefits compared to using the standard means of implementation of a framework programme:

· a clear commitment of the stakeholders;

· visible legal, contractual and organisational framework to structure the specific joint commitments to which stakeholders are ready to sign up;

· firm governance structure for the JU, including shared decision-making powers and management by the public and private partners, is visible to all stakeholders;

· budgetary certainty via the budget ceiling for EU contribution to cost of the operations and the private partners' financial commitment;

· efficient use of public resources as the Commission passes operational roles to the JU while retaining focus on regulation and supervision.

141. Furthermore, the use of a JU to implement the JTI with the current small-sized body is already at least cost neutral and probably more cost effective for the Commission because the private partner pays 50% of the running costs of the JU. This is shown by the cost-benefit analysis performed in-house DG RTD, by comparing JU to collaborative research initiatives and contractual PPPs in terms of administrative, supervision, establishment and winding up costs. Increasing the size of operations of the JTI JUs and simplifying their functioning on the basis of common participation rules for Horizon 2020 will make the JU a cost-effective means of implementation (see Annex III).

5.9.2. Possible improvements - efficiency

142. The "business as usual" scenario relies on the continuing of the JTI JUs under Horizon 2020 as they currently exist under the 7th Framework Programme. In contrast, the CS2 option simplifies and improves the legal framework, governance, and operational modalities of the current JUs.

143. In particular, in order to ensure a good balance between cost-neutrality of the JTI JUs under Horizon 2020 and increase their cost-effectiveness, the following simplification measures are being considered:

· Foreseeing a single set of Rules for Participation and Dissemination that will, subject to derogations where appropriate, render participation easier and ensure a single and sufficiently flexible regulatory framework, will create a more coherent set of instruments covering both research and innovation, enhance programme accessibility and attractiveness, and increase the scientific and economic impact while avoiding duplication and fragmentation.

· Introducing lighter financial procedures, which in particular will provide simplified procedures for the establishment and the adoption of the budget and corresponding reporting. This is due to the new Financial Regulation which permits bodies like JTIs adopt lighter financial rules based on a new, tailor-made, simplified "model" Financial Regulation

· Using common IT systems, including the proposal evaluation system for Horizon 2020 which increases harmonisation, reduces the costs for such services and allows JU staff members to better adapt to the common software management programme. Moreover, by using the "commons" of the programme, the JUs coordinate better their internal processes regarding portfolio management, as well as monitoring and reporting towards the legislator and the Commission regarding management of programmes and projects.

· Exploring different options regarding establishing common services/functions (IT, Audit, Legal issues) for PPP/JTIs. These options are:

(a) Commission provides common services to JTIs JUs and requests from them the payment of a proportional contribution;

(b) JTIs JUs set up their own common functions, which are specific and shared among them;

(c) Each JTI JU organises itself individually.

· Sharing functions in the context of the internal audit or for the accounting officer (the latter case being explicitly provided for by the Rules of Application (RAP), Service Level Agreements, common service and supply contracts and exchange of information among JU colleagues.

· Continuity of staff between the current and future JUs for the period when the current project portfolio is closed down and the future portfolio is built up.

5.9.3. Possible improvements - effectiveness

144. At the same time, the above simplifications envisaged for the new JTI JUs to be set up under Horizon 2020 will also allow them to become more effective by:

· Clear stakeholder commitment to the JTI through (1) a definition, in a dedicated annex to the regulation, of the contribution to the JTI of industrial members, rendering their contribution more visible, (2) improved representation of the public and private partners in governing bodies, (3) a balance of influence between the Commission and Industry in the appointment of the Executive Director, etc.).

· Introducing more flexible budgetary and procurement procedures through adjusted legislative framework building on the new Financial Regulation.

· Increasing the accessibility and attractiveness of the programmes. The Horizon 2020 JTI JUs shall apply the common set of rules of the Horizon 2020 Rules for Participation, thus providing a coherent legal framework. Any derogation requested by the JU would have to be duly justified for specific needs and should be cost-effective for the implementation of Horizon 2020.

6. Comparing the Options

6.1. Comparison of the options

145. The following table presents the assessment of the different policy options compared to the option Business as Usual. This option is chosen as reference because it presents the current situation and has proven to be efficient means for R&D in the aeronautics sector.

- || = || +

Disadvantage compared to reference || Same impact as reference || Benefit compared to reference

Option Criteria || Business as Usual BAU || Contractual PPP cPPP || Renewed JTI CS2 ||

Effectiveness || || || ||

Critical mass || = || - || + ||

Impact on SMEs || = || - || = ||

Leverage effect || = || - || = ||

Innovation impact || = || = || + ||

Environmental impacts || = || = || + ||

Economic impact || = || = || + ||

Social Impact || = || - || + ||

Efficiency || || || ||

Administrative costs || = || - || + ||

Administrative simplicity || = || = || + ||

Coherence || || || ||

Coherence with programmes of MSs || = || - || = ||

6.2. Preferred option

146. Based on the assessment, the CS2 option provides the best means to achieve the defined objectives. In addition, it has very good synergy with the currently implemented research programme and can be built up upon technologies and demonstrators developed under Clean Sky following a smooth transition.

147. CS2 option allows timely execution of the full research programme and offers a higher level of integration with full aircraft demonstrators so as to understand the full impact, including risks and synergies of the combination of innovative technologies. This would allow maximising technological innovation which will help to address more ambitious objectives for air transport regarding environmental impact and passenger mobility, following the Europe 2020 strategy, the Transport White Paper, Flightpath 2050 and is in line with the Horizon 2020 objectives.

148. It helps the most to overcome the so-called "market failure" by using public support to reduce the development risk of non-conv