In addition to the economic impact of regulatory costs themselves another important factor is long term certainty with regard to regulatory relief e g EU ET S indirect cost compensa tion Currently the decision on indirect cost compensation is tak en at Member S tate level and can change from year to year e g link ed to the availability of budgets This creates a highly uncertain investment climate e g for measures related to energy savings or invest ments in new production technologies Finally while higher electricity prices do have an important impact on competitiveness of metals production they do not necessarily lead to faster GHG mitigation in metals pro duction and will have a limited impact on energy efciency improvements Modelling by the JRC 252 showed that a scenario with higher CO 2 price but electricity prices not being afected by the CO 2 price e g through indirect cost compensation brings the fastest and deepest GHG mitigation in aluminium production in the period 20202050 On the other hand over the same period the efciency improvements in aluminium production will not change signifcantly over diferent scenarios including the ones that have high electricity prices This can be e xplained by on the one hand new mitigation technologies that reduce direct emissions e g CCS or inert anodes being deployed sooner and on the other hand the limitation to reduce energy use given that most major possibilities for energy improve ments are already e xhausted Hence there is little or no climate beneft to be derived from high electricity prices for primary aluminium production Figure 43 2050 scenario s for aluminium production left direct C O 2 emissions t C O 2 t cast alumin ium right energy use GJt primary aluminium Source JRC 2015 253 252 JRC 2015 253 Ibidem Figure 42 C O 2 intensity of metals production EU vs China t C O 2 t metal 248 High economic sensitivity to electricity prices Not only does the electricity cost impact the competitiveness with metals produced outside of the EU the proftability of highly electrointensive metals production is very sensitive to electric ity prices For instance electricity costs for primary aluminium plants observed between 2008 and 2017 were much higher than proftability indicators such as EBITD A and EBIT 249 R ecent research on German metals production showed the high importance of regulatory relief in electricity pricing for metals Without regulatory relief 250 schemes the electricity price for aluminium electrolysis would be more than three times higher The cost of having to pay all regulatory price components would completely consume the gross value added of the aluminium electrolysis and even turn negative i e a loss of EUR 75 million The G V A of a large aluminium rolling mill would drop by appro ximately 32 EUR 58 million For a large copper rolling mill the elimination of regulatory relief schemes would result in a reduction of the G V A by appro ximately 18 EUR 35 million The economic sensitivity to higher elec tricity prices is high for metals producers An increase of EUR 10 MWh would correspond to a reduction in gross value added of 23 for the metals industry while the impact for the entire manufacturing industry would be fve times less 0 5 251 Given that electricity costs already constitute a major factor in the production costs for EU metals producers such price increases can seriously impact the competitiveness with major producers outside Europe see above especially given that metals prices are set globally see chapter 4 248 European Aluminium Association 2018c The Nick el Institute Nick el class I produced in the EU compared to Chinese Nick el Pig Iron production A ctual nick el CO 2 intensity in Europe is 2tt nick el class I but mining and smelting happens outside the EU Silicon 2016 AlloyConsult study on CO 2 emissions in silicon and manganese ferroalloys Zinc Congcong Qi et al 2017 and the Zinc institute 249 CEPS ECOFY S 2018 250 It should also be noted that such regulatory relief is often justifed economically For e xample numerous Member S tates implement network charge reductions for large baseload consumers due to the stabilising efects that these consumers have on the network reducing network costs In such cases regulatory relief is actually necessary in order to ensure that such charges are costrefective 251 EWI 2019 EU China 186 241 150 678 7 0 20 0 Aluminium 9 0 70 0 Nick el 34 116 Silicon 24 6 1 Zinc Baseline scenario L ow CO price High CO price Alternative secondary Extra High Elec Price High Elec Price 0 10 20 30 40 50 60 70 80 2010 2020 2030 2040 2050 0 1 2 3 4 2010 2020 2030 2040 2050 MET ALS IN A CLIMA TE NEUTRAL EUROPE A 2050 BL UEPRINT 70