Cumulative Costs Assessment (CCA) of the EU Glass industry 32 nd Şişecam Glass Symposium - Istanbul, 23 October 2017
2 Outline of the presentation Scope Trends (2006-2015) Typical Year (2015) Energy legislation Environment (Industrial Emissions Directive)
CCA of the EU glass industry: Scope
4 CCA: Rationale and scope Cumulative cost assessment: what are the costs of the EU acquis for a given industry? Identifying, assessing and, where possible, quantifying the cumulative costs generated by selected areas of EU legislation on a given industrial sector Evaluating the impact of regulatory costs on the cost structure and profitability of a typical company operating in a given industrial sector Key features No benefits, all about regulatory costs Several legislative acts Ex post perspective (e.g. 2006-2015) Single industry Sectoral competitiveness (cost competitiveness, international competitiveness)
5 Areas of EU legislation 1. Internal Market: Internal Market for chemicals (mainly REACH), Measuring Instruments Directive (only for Glass Tableware) 2. Energy legislation: Electricity (Internal Energy Market, Renewable Energy, Energy Taxation), Gas (Internal Energy Market, Energy Taxation), Energy efficiency 3. Climate legislation (EU ETS, Verification, Monitoring and Reporting of greenhouse emissions) 4. Environmental legislation: Industrial Emissions (IPPC/IED), Waste (Waste Framework Directive and Landfill of Waste), Packaging and packaging waste 5. Workers and workplace safety legislation: General workers health and safety and workplace safety, special workers health and safety (noise, electromagnetic fields, artificial optical radiation, chemical agents) 6. Consumers and health legislation (GPSD, Contact with food)
6 Composition of the sample Packaging glass Glass tableware Southern Europe 10 Central Eastern Europe 6 Northern Western Europe 10 Total 26 (21)* 5 Note: *Five respondents manufacture special products and cannot be considered as typical plants, hence, their data have not been used to assess regulatory costs. 5
Turnover of sampled plants out of total value of production sold by EU producers (%) 7 Hollow Glass Packaging** 12.9* 14.0* 13.4* 14.4* 14.7* 15.2* 15.8 15.2 15.2 15.7 Hollow Glass - Tableware 70.6*** 36.5 38.0 37.7 38.3 39.9 56.5 36.4 38.3 41.7 Note: * Missing data for one plant over the period 2006-2011 and for another plant over the period 2006-2009. **Turnover based on a sample of 21 plants used to assess regulatory costs. ***For 2006, the higher value is due to lack of data from PRODCOM for the product Other drinking glasses (23131290). Hollow Glass Packaging includes the NACE Rev. 2 categories 23.13.11.10/20/30/40/50/60/80. Hollow Glass Tableware includes the NACE Rev. 2 categories 23.13.12.20/40/60 and 23.13.13.50/90.
CCA of the EU glass industry: Trends (2005-2016)
Packaging glass: Cumulative costs by category of regulatory costs ( /tonne) 9 16 14 12 10 8 6 4 2 0 AB SCC DC IC
Packaging glass: Cumulative costs versus production costs ( /tonne) 10 350 300 250 200 150 100 50 0 Production costs 276.7 271.4 295.8 298.7 293.4 300.4 312.0 314.1 316.2 318.8 Regulatory costs 13.0 8.7 13.7 11.5 12.8 13.0 11.6 11.1 11.7 12.3
Packaging glass: Cumulative costs versus margins ( /tonne) 11 100 80 60 40 20 0 EBITDA 73.7 79.2 85.3 90.2 85.2 74.3 77.1 80.3 84.1 83.9 Regulatory costs 13.0 8.7 13.7 11.5 12.8 13.0 11.6 11.1 11.7 12.3 80 60 40 20 0 EBIT 43.9 50.0 48.8 59.6 54.3 44.0 47.0 49.3 54.2 52.0 Regulatory costs 13.0 8.7 13.7 11.5 12.8 13.0 11.6 11.1 11.7 12.3
Glass tableware: Cumulative costs by category of regulatory costs ( /tonne) 12 40 35 30 25 20 15 10 5 0 AB SCC DC IC
Glass tableware: Cumulative costs versus production costs ( /tonne) 13 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Production costs 1,408 1,351 1,451 1,559 1,632 1,659 1,663 1,581 1,398 1,445 Regulatory costs 30.9 20.4 34.9 30.0 33.3 32.5 30.8 32.7 29.8 33.2
Glass tableware: Cumulative costs versus EBITDA ( /tonne) 14 250 200 150 100 50 0-50 EBITDA 153.5 118.6 179.7 47.0 223.1 191.6 123.5 62.5 150.8-3.1 Regulatory costs 30.9 20.4 34.9 30.0 33.3 32.5 30.8 32.7 29.8 33.2
CCA of the EU glass industry: Typical year (2015)
Packaging glass: Regulatory costs by area of legislation and comparison with KPI (2015, /tonne) 16 Electricity Production Cost 318.8 Gas Climate 9% 6% 28% Environment 10% Waste Worker safety, general Other 19% 18% 9% Regulatory Cost 12.3 EBITDA 83.9 EBIT 52.0
Glass tableware: Regulatory costs by area of legislation and comparison with KPI (2015, /tonne) 17 Electricity Gas Climate 7% 4% 17% Production Cost 1,445.1 Environment Waste 6% 12% 12% Worker safety, general Measuring Instrument Directive Other 20% 22% Regulatory Cost 33.2 EBITDA (2014) 150.8 EBITDA (2015) - 3.1
CCA of the EU glass industry: Energy legislation
Packaging glass: Impact of energy costs on production costs ( /tonne) 19 350 300 250 200 150 100 50 0 EU average Other costs 219 213 230 232 233 241 242 244 250 258 Gas 35 35 42 42 35 36 45 46 44 39 Electricity 23 23 24 25 25 23 25 24 22 21
20 Packaging glass: Electricity intensity (MWh/tonne) 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 EU weighted average
21 Packaging glass: Electricity prices ( /MWh) 120 100 80 60 40 20 Other taxes, fees, levies and charges (excl. VAT) 0 EU average 6 6 5 6 6 6 6 6 8 8 Renewable support 6 7 7 7 9 13 15 15 20 20 Network costs 12 13 13 13 13 12 13 12 13 13 Energy supply costs 62 63 64 69 69 68 70 66 60 59
Packaging glass: Electricity - EU regulatory costs ( /tonne) 22 4 3.5 3 2.5 2 1.5 1 0.5 0 IC DC
Gas Intensity (MWh/tonne) 23 Packaging glass: Gas intensity (MWh/tonne) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 EU (boxplot) EU weighted average
24 Packaging glass: Gas prices ( /MWh) 35 30 25 20 15 10 Other taxes, fees, levies and charges (excl. VAT) 5 0 1 1 1 1 1 1 1 1 1 1 Network costs 1 1 1 1 1 1 2 2 2 2 Energy supply costs 22 22 26 26 22 23 29 29 28 25
Packaging glass: Gas - EU regulatory costs ( /tonne) 25 1.4 1.2 1 0.8 0.6 0.4 0.2 0 IC DC
Glass tableware: Impact of energy costs on production costs ( /tonne) 26 1800 1600 1400 1200 1000 800 600 400 200 0 EU average Other costs 1258 1186 1274 1329 1413 1442 1434 1357 1194 1256 Gas 106 122 127 168 163 160 168 161 147 134 Electricity 45 44 51 63 56 57 62 63 57 55
27 Glass tableware: Electricity intensity (MWh/tonne) 0.60 0.50 0.40 0.30 0.20 0.10 0.00 EU weighted average
per MWh 28 Glass Tableware: Electricity prices ( /MWh) 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Other taxes, fees, levies and charges (excl. VAT) EU average 1.5 1.5 1.3 1.8 1.4 1.6 1.6 2.5 2.1 1.9 Renewable support 0.0 0.0 0.0 0.2 0.7 0.7 3.3 3.1 5.3 9.3 Network costs 7.7 8.2 8.3 8.7 8.8 9.9 11.5 11.4 9.4 8.9 Energy supply costs 38.8 40.1 40.5 47.6 44.6 44.4 46.5 46.0 45.5 45.9
Glass tableware: Electricity - EU regulatory costs ( /tonne) 29 8 7 6 5 4 3 2 1 0 IC DC
Gas Intensity (MWh/tonne) 30 Glass tableware: Gas intensity (MWh/tonne) 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 EU weighted average
per MWh 31 Glass tableware: Gas prices ( /MWh) 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Other taxes, fees, levies and charges (excl. VAT) EU average 0.58 0.64 0.68 0.82 0.92 0.94 0.62 0.91 0.94 1.17 Network costs 0.90 1.08 1.12 1.55 1.33 1.27 1.09 1.45 1.23 1.34 Energy supply costs 19.10 22.53 22.79 29.13 28.70 30.96 31.05 27.92 26.19 23.28
Glass tableware: Gas - EU regulatory costs ( /tonne) 32 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 IC DC
CCA of the EU glass industry: Environmental legislation (IED)
34 Hollow glass: EU regulatory costs ( /tonne) Direct regulatory costs Administrative burdens Substantive compliance costs Packaging glass Glass tableware 0.22 1.05 2.12 5.69 Direct charges 0 0 Indirect regulatory costs 0 0 Total regulatory costs 2.34 6.73
Felice Simonelli, PhD Research Fellow CEPS email: felice.simonelli@ceps.eu Thank you for your attention. CEPS_thinktank
Back-up slides
CCA of the EU glass industry: Climate legislation
38 Packaging glass: EU regulatory costs ( /tonne) 6 5 4 3 2 1 0-1 AB SCC DC IC
39 Glass tableware: EU regulatory costs ( /tonne) 20 20 15 15 10 10 5 5 0 0-5 -5-10 -10-15 -15 AB SCC DC IC (pass on=1) AB SCC DC IC (pass on=1)
CCA of the EU glass industry: International comparison
Packaging glass: International comparison ( /tonne) 41 400 300 200 100 0 PRODUCTION COSTS EBITDA EBIT EU CEE SE NWE NEIGHBOURING COUNTRIES Data for neighbouring countries are based on a total of six observations from: Algeria Russia Switzerland Turkey Ukraine 80 60 40 20 0 ELECTRICITY COST GAS COST EU CEE SE NWE NEIGHBOURING COUNTRIES