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1 OECD economic Surveys EUROPEAN UNIONV olume 2009/13 September 2009 OECD economic SurveysEUROPEAN UNIONV olume 2009/13 September 2009 XXX PFDE PSH QVCMJTIJOHISBN 978-92-64-05445-5 10 2009 13 1 P-:HSTCQE=UZYYZZ:Volume 2009/13 September 2009 Subscribers to this printed periodical are entitled to free online access. If you do not yet have online access via your institution s network contact your librarian or, if you subscribe personally, send an e-mail to Countries: Most recent editionsBaltic States, February 2000 Brazil, July 2009 Bulgaria, April 1999 Chile, November 2007 China, September 2005 Estonia, April 2009 India, October 2007 Indonesia, July 2008 Romania, October 2002 Russian Federation, July 2009 Slovenia, July 2009 South Africa, July 2008 Ukraine, September 2007 Federal Republic of Yugoslavia, January 2003 Most recent editionsAustralia, October 2008 Austria, July 2009 Belgium, July 2009 Canada, June 2008 Czech Republic, April 2008 Denmark, February 2008 Euro area, January 2009 European Union, September 2009 Finland, June 2008 France, April 2009 Germany, April 2008 Greece, July 2009 Hungary, May 2007 Iceland, September 2009 Ireland, April 2008 Italy, June 2009 Japan, April 2008 Korea, December 2008 Luxembourg, June 2008 Mexico, July 2009 Netherlands, January 2008 New Zealand, April 2009 Norway, August 2008 Poland, June 2008 Portugal.

2 June 2008 Slovak Republic, February 2009 Spain, November 2008 Sweden, December 2008 Switzerland, November 2007 Turkey, July 2008 United Kingdom, June 2009 United States, December 2008 OECD economic SurveysEUROPEAN UNIONSPECIAL FEATURE: ENERGY AND CLIMATE CHANGEISSN 0376-6438 2009 SUBSCRIPTION (18 ISSUES) 115-Sep-2009 2:42:20 PMOECD economic Surveys:European Union2009 ORGANISATION FOR economic CO-OPERATION AND DEVELOPMENTThe OECD is a unique forum where the governments of 30 democracies work together toaddress the economic , social and environmental challenges of globalisation. The OECD is also atthe forefront of efforts to understand and to help governments respond to new developments andconcerns, such as corporate governance, the information economy and the challenges of anageing population. The Organisation provides a setting where governments can compare policyexperiences, seek answers to common problems, identify good practice and work to co-ordinatedomestic and international OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic,Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.

3 The Commission ofthe European Communities takes part in the work of the Publishing disseminates widely the results of the Organisation s statistics gathering andresearch on economic , social and environmental issues, as well as the conventions, guidelines andstandards agreed by its 978-92-64-05445-5 (print)ISBN 978-92-64-05446-2 (PDF)ISSN 0376-6438 (print)ISSN 1609-7513 (online)Also available in credits: Cover Pat O Hara/The Image Bank/Getty to OECD publications may be found on line at: OECD 2009 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimediaproducts in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as sourceand copyright owner is given. All requests for public or commercial use and translation rights should be submitted to Requests forpermission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC)at or the Centre fran ais d exploitation du droit de copie (CFC) at OF CONTENTSOECD economic SURVEYS: EUROPEAN UNION OECD 20093 Table of contentsExecutive summary.

4 8 Assessment and recommendations ..11 Chapter to overcome the crisis..23 The shadow of the global financial and economic crisis and recession now hangs over the EU ..24 Structural reforms must continue to be pursued ..27 Tackling the crisis and supporting structural reforms..38 Notes ..41 Bibliography ..41 Chapter research and innovation..43A snapshot of innovation performance ..45 The European innovation policy framework ..50 Concluding comments ..66 Notes ..67 Bibliography ..68 Chapter the single market ..71 The current state of the single market ..72 Deepening the single market ..77 The Better Regulation agenda ..84 Concluding comments ..85 Notes ..85 Bibliography ..86 Chapter policy and the transition to a low-carbon economy..89A snapshot of the energy sector ..92 The energy policy framework ..95 Emissions Trading Schemes.. 100 The 20% renewable energy target and low-emission technologies.

5 110 The 20% energy savings target.. 117 Toward a single and secure electricity and gas market .. 121 Conclusion .. 126 Notes .. 128 Bibliography .. 129 TABLE OF CONTENTSOECD economic SURVEYS: EUROPEAN UNION OECD 20094 Chapter opening the European market to the rest of the world.. 131 Selected issues in EU trade policy .. 132 The Common Agricultural Policy.. 146 Notes .. 155 Bibliography .. 156 Glossary .. Possible effects of the recession on potential output and unemployment .. Creativity .. The European Research Area .. The broad-based innovation strategy .. Recommendations concerning innovation .. The Market Monitoring Process .. Recommendations concerning the single market .. Greenhouse gas emissions and climate change .. Sharing the global burden of climate change mitigation policies .. Emissions trading compared with other carbon pricing mechanisms .. Carbon capture and storage.

6 Recommendations concerning climate change and energy policies .. Recommendations concerning trade and agricultural policy .. Typical service life for selected investments .. Tariffs and imports by product groups in the EU .. Contributions to EU27 GDP growth .. Projected cumulative GDP growth in 2009-10.. Decomposition of cumulative changes in government balance .. Unemployment rates in the EU .. Overall employment protection legislation (EPL) .. Euro area potential GDP .. The sources of differences in GDP per capita .. Gross domestic and business enterprise expenditure on R&D .. Government-financed GERD and higher education expenditure on R&D .. Triadic patents and scientific articles .. Business enterprise researchers .. Product market regulation .. Trade integration inside the EU27 .. EU15 labour productivity growth relative to the United States .. Fragmentation of the internal market.

7 World GHG emission trends by country/region .. Projected temperature increases under OECD baseline scenario .. The probability distribution of the social cost of carbon .. Sectoral final energy consumption by source .. Total primary energy supply .. Electricity prices for industry ..94 TABLE OF CONTENTSOECD economic SURVEYS: EUROPEAN UNION OECD Per capita GHG emissions .. Costs of stabilising GHG concentrations at 550 ppm.. Projected fossil fuel intensities.. EUA prices in Phase I and Phase II of the EU emissions trading scheme .. Greenhouse gas emission targets for 2008-12 .. Public energy-related R&D budgets in OECD countries.. EU export volume growth .. The growing importance of external trade .. Trade balance by commodity .. Export volume growth in OECD countries .. The European spaghetti bowl .. Nominal unit labour costs in selected European countries.

8 Total agricultural support in OECD countries .. Producer support estimates by support category in EU27 .. Producer single commodity transfers by commodity in EU27 .. Average direct payment per hectare .. Average direct payment per beneficiary .. Distribution of average direct payment per beneficiary in EU25 .. 151 This survey is published on the responsibility of the economic and DevelopmentReview Committee of the OECD, which is charged with the examination of theeconomic situation of member economic situation and policies of the European Union were reviewed by theCommittee on 28 May 2009. The draft report was then revised in the light of thediscussions and given final approval as the agreed report of the whole Committee on8 July Secretariat s draft report was prepared for the Committee by Nigel Pain andJeremy Lawson under the supervision of Peter Hoeller.

9 Research assistance wasprovided by Isabelle previous survey of the European Union was issued in September book service that delivers Excel files from the printed page!Look for the StatLinks at the bottom right-hand corner of the tables or graphs in this book. To download the matching Excel spreadsheet, just type the link into your Internet browser, starting with the prefix. If you re reading the PDF e-book edition, and your PC is connected to the Internet, simply click on the link. You ll find StatLinks appearing in more OECD STATISTICS OF THE EUROPEAN UNION, 2008EU15EU12EU27 LAND AND PEOPLEArea (thousand km2)32381 0884326 Population (million) of inhabitants per growth (1998-2008, annual average % rate) force (million) rate (%) (billion EUR, current prices)11 52698112 507 Per capita GDP (current PPS)27 70015 20025 100In per cent of GDP:Gross fixed capital of goods and of goods and FINANCE (per cent of GDP)General public debt (end-year) TRADE IN GOODS (main partners, % of total flows)ExportsImportsUnited Europe (incl.)

10 Russia) SUMMARYOECD economic SURVEYS: EUROPEAN UNION OECD 20098 Executive summaryThe European Union is facing severe challenges from the financial crisis and the worst globalrecession in the past fifty years. The Community has responded to the crisis proactively, consistentwith the broad framework for policy actions provided by the European economic Recovery have been taken to stabilise financial markets and support the economy. An ambitiousagenda for financial services reform is underway to improve macro- and micro-prudential regulationand supervision, and the ECB has cut its policy rate is essential that policy actions to support economic activity during the crisis do not imperil theprospects for recovery or endanger the single market and, where necessary, some measures must bewithdrawn once the economy recovers. Fiscal measures should ideally offer dual benefits; mitigatingthe impact of the recession on output and jobs as well as providing longer term benefits.