The Regulatory Scrutiny Board and climate change — experiences to date and a look to the future

Since many years, as part of its Better Regulation approach, the Commission has put in place a comprehensive system to assess the impact of its legislative proposals and major policy initiatives. Carrying out an independent review of these impact assessments is the role of the Regulatory Scrutiny Board of the European Commission, providing advice to the Commission’s College. Veronica Gaffey, who chairs the Regulatory Scrutiny Board since March 2019, has a long experience in policy evaluation. Below she explains the role of the Board, some of the criteria it uses in its assessments and zooms in on the Board opinions covering several aspects of Commission’s activities on climate change and environmental issues in a broad sense. She expects that the Board’s scrutiny work in this area will only increase in the future.

By Veronica Gaffey, Regulatory Scrutiny Board of the European Commission

Impact assessment — a tool with a long tradition at the European Commission

The European Commission has strengthened its requirements for impact assessments over the years. In 2002, it introduced a requirement for impact assessments for new policy proposals and regulations. Such impact assessments had to define the need for EU action and analyse a variety of options for action. In 2006, it established an Impact Assessment Board, made up of senior managers from across Commission directorates-general (DGs).

In 2015, the European Commission published a renewed Better Regulation Agenda. This was in the context of the stated aim of the Juncker Commission to focus on priorities and legislate only when necessary. The Agenda strengthened the earlier initiatives such as the requirements for impact assessments of new policies, reviews of existing legislation and evaluations. It introduced systematic stakeholder consultation. It also announced the establishment of the independent Regulatory Scrutiny Board to replace the previous Impact Assessment Board.

The commitment to better regulation continues. Upon taking office, President von der Leyen emphasised in her letters to incoming Commissioners that all proposals of the new Commission ‘must be evidence based, widely consulted upon, subject to an impact assessment and reviewed by the independent Regulatory Scrutiny Board.’ One of the major priorities of the von der Leyen Commission is to tackle climate change.

Role of the Regulatory Scrutiny Board

The Regulatory Scrutiny Board is an independent body of the Commission that offers advice to the College of Commissioners. We provide a central quality control and support function for impact assessments and evaluations. We examine and issue opinions and recommendations on all the Commission’s draft impact assessments and major evaluations of existing legislation. The Board has a chairperson and six members, three of them recruited from outside the EU institutions. They are all appointed for fixed terms, work full time and are free of policy responsibilities within the Commission.

The Board has a very specific role as one part of the European Better Regulation Agenda and we intervene at a particular point in time during the policy making process:

• the European Commission sets priorities;
• Directorates-General (DGs) evaluate existing legislation, consult stakeholders and draft impact assessments. The impact assessment assembles evidence, identifies options and analyses their potential strengths and weaknesses before selecting the best option available;
• the Regulatory Scrutiny Board scrutinises all impact assessments and major evaluations. Impact assessments must receive a positive opinion from the Board in order to proceed. If the Board issues a negative opinion, the services need to do more work and resubmit an improved report for another round of Board scrutiny. In the case of a second negative opinion, the Commission can nevertheless decide to proceed, but must explain publicly why. The Commission publishes all Board opinions together with the impact assessments and evaluations; and
• the Board does not scrutinise the proposed legislative acts. The co-legislators — European Parliament and Council — use the impact assessments as a basis when deciding on the legislation, followed by implementation by the Member States.

The Board does not decide on initiatives or on policy objectives. That is the role of the European Commission. The Board’s role is to contribute to improve the evidence base and quality of the Commission’s impact assessments and evaluations. we do this in our opinions, which explain the weaknesses of the reports and suggest ways to improve them.

Quality of impact assessments

The Regulatory Scrutiny Board’s annual reports record improvements in the quality of impact assessments. From 2016 to date, we issued some 190 opinions on impact assessments, with 37% initially negative. DGs have gained experience in carrying out the assessments. If they have prepared them before, they are familiar with the better regulation requirements and know what the Board looks for: the clarity of the logic of intervention, appropriate use of evidence, proper use of consultation results, etc. Upstream meetings with DGs on planned impact assessments also support the work.

Impact assessments should be fit for purpose, communicating the best available evidence and making it clear where evidence ends and political judgement begins. A fit for purpose impact assessment is a package that includes sound methodology, data collection, consultation strategy, evaluation of past actions, definition of policy options, and proportionate analysis of impacts. There are genuine methodological challenges in quantifying expected impacts and assessing policy for the whole of the EU. The better regulation guidelines require an examination of costs and benefits. They look not only at economic impacts but also at social and environmental ones. Impacts on SMEs or fundamental rights also feature. Often, the services cannot quantify impacts at the time of the analysis, often due to a lack of data, but qualitative analysis, which sets out likely channels of impact and their scale, can support the decision making process.

There is no set formula to guarantee a positive opinion. What the Board considers good depends on context and takes into account what is possible and proportionate in each case. In any impact assessment, the services must consider the evidence and explore the options. In the end, however, the services make a judgement call in selecting the recommended option. It is the role of the Board, as an independent and neutral party, to take time to examine and ultimately validate the basis for such judgement calls before proposals go to the College of Commissioners for decision.

Environmental issues in impact assessments and Board Opinions

The Commission’s guidance (Better Regulation Guidelines and Toolbox, 2017) states that DGs must assess all proposals for economic, social and environmental impacts. The environmental impacts to assess include climate, efficient use of resources, quality of natural resources, biodiversity, waste reduction and management, minimising environmental risks and protecting animal welfare.

Table 1 shows the number of impact assessments scrutinised by the Board between 2017 (when it revamped its system to gather statistics) and 2019. Of the 130 impact assessments, 46% explored environmental impacts. In 15% of cases, the Board mentioned the need to improve environmental aspects in its opinion. What follows is an analysis of those twenty cases.

Table 1- Environmental impacts in impact assessments, 2017–2019

Figure 1 shows that the twenty cases involved a variety of DGs. Most cases were presented by the Energy and Transport DGs.

Figure 1 — Impact assessments with environmental impact mentioned for improvement in opinion

The cases covered climate change, natural resources, energy production and use, waste management and marine litter, transport, emissions, pollution, circular economy. Figure 2 provides an overview of broad themes in the cases, colour-coded by outcome of the opinion. In several cases, themes overlap, e.g., in the relationship between climate and market, economy and sustainability, or energy and climate.

Figure 2: Environmental Issues mentioned in Opinions

As Board we regularly underline how existing regulations and directives at EU level must be examined as to how they are functioning, consistent with an ‘evaluate first’ principle. This facilitates identification of what is working well and less well under existing legislative structures, where there are problematic aspects or loopholes across Member States. It helps to identify issues that would need to be addressed in a possible revision of the legislation. In our opinions, we regularly calls for a more precise depiction of what success would look like to inform future monitoring and reporting systems. Methodological issues in defining what is ‘green’ and ‘sustainable’ at EU level also emerge.

Waste reduction

The Board has scrutinised various initiatives to reduce waste. In our remarks, we stressed two elements: first, the need to clarify the scope of the initiatives analysed and their added value as compared to existing norms. Second, there is a need to identify the scale of environmental benefits and to compare the costs of the various policy options, including compliance and investment costs. For instance, in our opinion on reducing marine litter (plastic and fishing gear) we highlighted the need to better analyse possible shortcomings of existing environmental, fisheries and maritime legislation as well as the cross-border implications .

Climate change

The Board has scrutinised ten impact assessments related to climate change. We have asked for clearer depictions of the final objective in the initiatives and of the expected contribution from an initiative towards each goal. It has also encouraged analysis of coherence with other instruments contributing to the same objective, such as employing fuel taxes, vehicle registration taxes, or CO2 emission standards in the case of reducing CO2 emissions. Conforming to EU targets for 2030, we have also encouraged a more detailed account of ways to disincentivise road-only transport (especially road freight transport) in favour of alternative rail or maritime means. Similarly, the Board has recommended more complete explanations concerning the role of stimulating the market for clean vehicles, the reasons for observed inertia of some industries (e.g. the trucking industry) in developing fuel saving technologies, and how market uncertainties may lead to underinvestment in new low-emission technologies.

Climate issues clearly reveal a cross-border nature. The need for a clear and effective regional approach at EU-level is necessary in impact assessments, as well as reflecting on implementation and future monitoring of policy options in practice in Member States.

Energy saving and efficient use of resources

In impact assessments covering ‘EU Energy Policy Goals’ and the ‘Eco-design Directive’ on the requirements for energy related products, the Board has asked DGs to strengthen the assessment of the impacts in terms of energy savings. We have called for the monetisation of impacts as much as possible, including of CO2 emissions. We have underlined the need to systematically address costs (notably compliance costs) as well as measures for improving material resource efficiency.

Related to energy and resource efficiency, we have emphasised that while environmental and climate change issues are fundamental, the dimension of sustainability is also key. This is at times overlooked in initiatives.

Circular Economy and Sustainability

The relationship between green issues, economy, and finance has also featured in the Board’s opinions. The environmental, social and governance factors have become more relevant. Initiatives are encouraged to explain broad notions of ‘do no harm’ and sustainability, and how they can be made fully operational in practice.

Opinions regularly mention the relationship between new initiatives and the circular economy — i.e. an economic system based on eliminating waste and continual use of resources. We have asked DGs to build more robust arguments regarding circular economy objectives and to justify why certain circular economy options are put forward and not others.

Last, in light of the ‘EU 2030 Energy and Climate Targets’ and the ‘Energy Union Framework Strategy,’ the Board highlighted the relationship between environmental issues and single market objectives. Notably, we emphasised the importance of finding a balance between energy efficiency, circular economy and consumer preferences — including nudging consumers towards energy-saving choices.

General Environmental Impacts

In opinions on free trade agreements, the Board emphasised how the level of ambition in terms of environmental standards needed to be strengthened. We highlighted the need to tackle certain issues dealing with trade and sustainable development more specifically. The Board underlined the importance of positive impacts on environmental, labour and social conditions and promoting EU standards.

Climate Change in future impact assessments

With the ‘Green Deal’ one of the major priorities of the von der Leyen Commission, the environmental and climate impacts of all proposals will receive greater attention and, therefore, will receive scrutiny from the Board. Given the priority of climate change, more proposals, which aim to have ‘green’ impacts will be proposed.

An issue of concern to the Board is how and if the cumulative ‘green’ impacts of future proposals will be assessed. If each proposal looks at its impacts only, there is a risk of missing the overall effects and perhaps how some proposals may work against each other.

The Commission announced in its ‘Green Deal’ (December 2019) that it will improve the way its better regulation guidelines and supporting tools address sustainability and innovation issues. The purpose is to ensure that all EU initiatives without direct ‘green’ objectives respect a green oath to ‘do no harm.’ There is a need to clarify how to integrate this green oath in impact assessments, and to what extent trade-offs between green and non-green impacts remain possible.

The Regulatory Scrutiny Board intends to include a session on assessing green impacts at its next Annual Conference. We will also discuss with our national counterparts how they approach this issue.

This article was first published on the 2/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.