TTIP Impacts on European Energy Markets and

Manufacturing IndustriesPresentation for EP/ITRE

Committee21st January 2015

Koen RademaekersStephan Slingerland

Triple E Consulting – January 2014

This Presentation

EU – US Trade Relations and TTIP

Potential impacts on the

energy sector

Potential impacts on the manufacturing sector

Conclusions and

recommendations

EU – US Trade Relations

EU – US Trade

Direction of trade

(bln €)

Goods (2013)

Services (2012)

Investment (2012)

EU to US 282 163 1,655

US to EU 196 149 1,536

Trade balance EU

+ 92 + 14 + €119

Source: Eurostat

A positive trade balance for the EU

TTIP Negotiation Process

Ongoing since 2013 Seven rounds so far 23 topics Negotiation areas

Market accessServices and

investmentRegulatory issuesSectoral annexes

Potential Impacts on the Energy Sector

EU – US Energy Commodities Trade

EU-27 - US trade by SITC (2013) per ton (Source: Eurostat)

Commodity EU Imports EU Exports

Coal103,285,1

428

Briquettes, Lignite and Peat 1,231 24,314Coke and Semi coke 199,066 6,874Petroleum oil and oils obtained from bituminous minerals, other than crude (refined)

17,905,931

22,054,330

Petroleum oil and oils obtained from bituminous minerals, crude (cf. ban on US crude oil exports)

4,8433,173,598

Waste oils 16,145 4Residual petroleum products 5,954,695 466,022Liquified propane and butane 1,484,660 1,819Natural Gas, whether or not liquefied 497,697 33Petroleum gases and other gaseous hydrocarbons

4,917 32,552

It is clear where the trade is...

Tariff and Non-Tariff Barriers for Energy

Fuel type Non-tariff measure EU tariff (0%)

US tariff (%)

Oil (US) Export ban - License Required

0 > 0.2%

Natural gas (US) Export ban - License Required

0 0

Refined fuels (gasoline, diesel)

(EU) Fuel quality directive (FQD)

0 > 0.4

Coal (EU/US) Climate policy 0 0Solar cells (tech)

(EU/US) Local content requirement

0 0

Wind energy (tech)

(EU/US) Local content requirement

2.7 1.25Tariffs are low, but significant non-tariff barriers exist

Source: WTO Tariff data

Impact on Energy Trade

Coal is already without tariffs

Export bans to be affected by TTIP?

Other barriers (climate policies, FQD) not directly affected

LNG trade to increase, but more interesting markets in Asia

Limited TTIP impacts on energy trade expected

Impact on Energy Security

... If export bans are removed... ... If LNG trade to Europe will become attractive... ... If a crisis mechanism is agreed on

(separately)...

Then TTIP could have a positive impacton energy security in the EU

Impact on Renewables

Through the removal of local content requirements (LCR) .... trade in renewable energy technologies is likely to increase

We expect possibilities for harmonisation without loweringenv. standards (for ex Ecodesign)

Potential Impacts on the Manufacturing Sector

Trade weighted average tariff rates (%) (2007)

Tariff Measures

Tariff barriers are generally low, with some exceptionsSource: CEPR. 2013

Non-Tariff Measures

Ad valorem equivalents of NTM in the U.S. and EU (%) (2007)

Source: CEPR, 2013

Almost 80% of the benefits of the TTIP are expected to come from the removal of NTMs

Depend on scenario All scenarios show

(limited) positive impacts on GDP

TTIP might lead to positive spill-overs in increased trade with third countries and adoption of standards

Small changes in emissions only

Overall impacts

Impacts on specific sectors

Source: CEPR 2013

Changes in EU output by 2027 (%)

EU Metals and Electrical machinery are likely to decrease outputs

TTIP benefits will not be equal for all Member

States

Source: Felbermayr et al. 2014

Core EU countries do not profit more than perifery

Changes in Real Per Capita Income of Selected Countries (%)

Depend on specific provisions or on additional agreements

Competitiveness: Lower US labour and energy costs stand against skills, energy efficiency, innovation

Relatively low movement of workers across sectors due to TTIP

Overall labour market impacts expected to be low

Labour market impacts

Impacts on Innovation

In particular companies with high R&D costs can profit from access to larger markets

Intellectual Property Rights and in particular Geographical Indicators could be at risk

Contribution of TTIP to longer-term re-industrialisation and greening of industry is unclear

There are likely to be some benefits for innovation, but relation of TTIP to EU long-term policy goals is unclear

Policy Recommendations

EnergySecurity of supply, trade and energy prices might be less affected than claimed Renewables might benefit from TTIP via removal of Local Content Requirements

Manufacturing industryA small positive impact for most EU manufacturing industries is expected, with large uncertaintiesInnovation might be stimulatedLabour market effects likely to be limited

Main Conclusions

MonitorMonitor closely if benefits of TTIP outweigh drawbacks of watering down on EU legislation (e.g. REACH, FQD)Follow-up on the implications of ISDS in relation to TTIPDiscussFurther discuss the relationship between TTIP and longer-term EU objectives regarding greening of industryAnalyseRe-estimate TTIP projections once draft texts have become public

Recommendations

Thank you for your attention

Triple E Consulting – January 2013

Investor-state dispute settlement (ISDS) mechanism in the TTIP is currently under debate – however very controversial

ISDS was introduced in the Treaty of Lisbon and currently used under the provisions of the Energy Charter Treaty (ECT) (with 80% of the EU cases)

If included in TTIP, environmental policies might be disputed by international energy companies where they have made investments

ISDS Mechanism