Commission Staff Working Document: Analysis of the recovery and resilience plan of Romania amending the approval of the assessment of the recovery and resilience plan of 29 October 2021

riterion 2.8 of Annex V to the RRF Regulation. 3.9. Costing Romania has provided individual estimated costs for all the measures in the REPowerEU chapter. Apart from the measures in the REPowerEU chapter, there are no new measures. Romania has also provided individual justifications for all the measures whose modifications entailed a change in the cost estimates or related milestones and targets, including on the proportionality of the relevant amendments. The cost information provided by Romania is mostly sufficiently detailed and substantiated. Romania provided estimates and assumptions on costs using the standard template table, which was intended to summarise the key information and evidence on costing. Descriptions of the methodology underlying the cost calculations are found in a document which Romania submitted separately. Romania also submitted additional documents and materials intended to clarify costing discrepancies and provide costing data and benchmarks on comparable investments done in the past or in other countries. These documents also include descriptions and explanations of the main drivers and changes in the costs of the amended measures and their proportionality. Reasonable costs Overall, assumptions used by Romania to estimate the costs of the measures in the REPowerEU chapter provide a reasonable explanation of their primary cost drivers. The provided materials generally allow to identify the methodology used in costing calculations, even if for a small number of measures this information is missing or not as clear. Nevertheless, there is no concrete evidence that would put into question the costing estimates provided. 23 Measures in the REPowerEU chapter, comply with the eligibility criteria set out in the RRF Regulation. All costs are incurred into after February 2022. Value-added tax (VAT) is not included in any of the cost estimates. The reasonability of the costs of the modified measures has not changed from the initial assessment of these measures. Changes in the cost estimates for all of them are duly justified and proportional. In the case of measures whose costs are being amended under Article 21(1) of the RRF Regulation, sufficient information has been provided to justify the objective circumstances and the proportionality of the changes in the cost estimates or related milestones and targets. In this context, the reasonability of the cost estimates, taking into account the new measures in the REPowerEU chapter and the amended measures, has been established to a medium extent. Plausible costs The amount of the estimated costs in the REPowerEU chapter, is in line with the nature and type of the envisaged reforms and investments. Romania provided supporting documents and evidence to substantiate the cost estimates for most of the new measures in the REPowerEU chapter. However, additional information on the plausibility of cost estimates was necessary in instances where the given explanations were not detailed or substantiated enough for plausibility to be established. The plausibility of the costs of the modified measures has not changed from the initial assessment of these measures, as the changes in the cost estimates for all of them are duly justified and proportional. Sufficient information has been provided to justify the objective circumstances and the proportionality of the changes in the cost estimates or related targets. Considering the limitations of an ex-ante assessment of cost estimates, the financing amounts were deemed appropriate. No double Union financing Romania has indicated that the costs for the new measures in the REPowerEU chapter will not be funded at the same time by other Union funding sources. The commitment to put in place safeguards which are meant to prevent double funding remain and has not been altered by the plan’s modification. Commensurate and cost-efficient costs The total cost of the modified Romanian RRP is commensurate to the expected social and economic impact of the envisaged measures. The plan is expected to effectively address a significant subset of challenges identified in the CSRs. The main objectives of the plan are to foster the twin transition, address bottlenecks to a lasting and sustainable growth, job creation and economic, social and institutional resilience, thereby reducing vulnerability to shocks. The plan contributes to strengthening social cohesion and social protection and to the implementation of the European Pillar of Social Rights. The plan enhances the economic, social and territorial cohesion and convergence within the Union. The economic and social impact of the plan in combination with the positive cost assessment, indicates that its cost is in line with the principle of cost- efficiency. 24  *** The justification provided by Romania on the amount of the estimated total costs of the modified recovery and resilience plan is to a medium extent reasonable, plausible, in line with the principle of cost-efficiency and is commensurate to the expected national economic and social impact. Romania provided sufficient information and evidence that the amount of the estimated cost of the reforms and investments of the modified recovery and resilience plan to be financed under the Facility is not covered by existing or planned Union financing. This would warrant a rating of B under criterion 2.9 of Annex V to the RRF Regulation. 3.10. Controls and audit The original assessment on the robustness and adequacy of the control system and other arrangements included in the Romanian RRP had concluded that these arrangements were adequate subject to the timely fulfilment of two milestones pertaining to the setting up of a repository system for the collection of data in line with art 22(2)(d) of the RRF Regulation and entry into force of the mandate of the main institutions implementing and controlling the Romania RRP. This warranted a rating of A under assessment criterion 2.10 of Annex V to the RRF Regulation. The Romanian authorities have confirmed that the internal control system, as well as the arrangements for the prevention, detection and correction of fraud, corruption, conflict of interest and double funding as previously assessed remain in place. In addition, as provided by the first relevant milestone included in the Annex to the original Council Implementing Decision, a Government Ordinance provided the Ministry of Investments and European Projects with the legal mandate to act as coordinating body and laid down the roles of the Ministry of Finance and the Audit Authority. In compliance with the second milestone, a repository system for monitoring the implementation of the RRP has been set up, including for the collection and storage of data required by Article 22(2)(d), points (i) to (iii). The adequacy of these measures has been assessed positively by the Commission in the context of the first payment request, including through commitments fulfilled by the second payment request. The modifications to the original plan and the introduction of the REPowerEU chapter as such do not affect the original assessment. However, in the context of the modifications to the Romanian RRP, its audit and control system needs to be reassessed. Since the original assessment, the Commission has had access to information on its actual implementation. This includes the preliminary findings of the audit on the protection of the financial interests of the Union performed by the Commission in Romania. In light of this information, the Commission considers that the internal control system of Romania’s RRP is overall adequate. Robustness of internal control system and distribution of roles and responsibilities The previously assessed arrangements as regards the roles and responsibilities of the actors for control and audit, the segregation of functions and independence of actors performing audits 25 remain adequate and were further enhanced through the entry into force of the Government Ordinance enacting the legal mandate of the Ministry of Investments and European Projects as coordinating body, and of the Ministry of Finance and the Audit Authority. Adequacy of control systems and other relevant arrangements The control system and other arrangements to prevent, detect and correct fraud, corruption and conflicts of interest when using funds provided by the Recovery and Resilience Facility continue to appear overall adequate. The implementation of an IT system for the monitoring and control of the measures, as well as for the collection of data in line with the requirements set out in Article 22(2)(d), points (i) to (iii) of the RRF Regulation is confirmed. Adequacy of arrangements to avoid double EU funding The previously assessed arrangements as regards the prevention, detection and correction of double funding remain in place as initially assessed by the Commission. Legal empowerment and administrative capacity of control function The legal mandates of all the institutions involved in implementation, control and audit have been approved by means of a Government Emergency Ordinance3. In line with this Ordinance, the Ministry of Investments and European Projects, as coordinating body, exercises all the tasks related to the monitoring, verification, control and recovery, and to the drawing up and signing of payment requests and management declarations. The implementation of the RRP is ensured by line ministries and their subordinated structures, through financing agreements with the Ministry of Investments and European Projects. Audits are entrusted to the audit authority within the Court of Accounts. This body is the same audit authority as the one used for the European Structural and Investment (ESI) funds. Its independence from the coordinating body and the institutions responsible for the implementation of the reforms and investments is confirmed. *** The nature and extent of the proposed modifications to Romania’s recovery and resilience plan do not have a material impact on the previous assessment (rating of A) of the adequacy of the control and audit arrangements proposed by Romania, as reflected in the previous SWD(2021)276 final. 3.11. Coherence The modifications to Romania’s RRP, in particular those related to green transition and the newly added REPowerEU chapter do not affect the overall coherence of the plan. 3 Emergency Ordinance No 124 of 13 December 2021 on the financial stability of financial institutions and institutions for the management of European funds allocated to Romania under the recovery and conversion mechanism and amending Government Emergency Order No 155/2020 as regards the development of the Recovery and Recovery, Recovery and Reduction Plan required by Romania for access to the foreign and reimbursable business space and to the budget of the Land of the Recovery and Recovery and Recovery Mechanism 26 For all key areas included in the Romanian RRP – green economy, education, business environment, health, social inclusion, public administration, and digitalisation – an explicit and coherent explanation of their respective contribution to the six pillars in Article 3 of the RRF Regulation is provided. The main focus of the Romanian RRP is unchanged, as green transition and digital transformation remain at its core, where the green reforms and investments included in the original RRP components are boosted by the new REPowerEU measures. Digital reforms and investments remain focused on supporting areas with the largest investment gaps such as digitalisation of public services and schools. The REPowerEU measures are coherent with Romania’s policy framework aimed at reducing greenhouse gas emissions and increasing the share of renewable energy sources. They also reinforce the measures included in the original RRP on energy efficiency and strengthening the electricity network by increasing the share of renewable energy and decreasing energy demand. The modifications to the RRP display coherence within the components, maintained throughout the overall structure and objectives of the plan. *** Taking into consideration the qualitative assessment of all components of Romania’s modified recovery and resilience plan, their individual weight (importance, relevance, financial allocation) and their interactions, the plan contains measures for the implementation of reforms and public investments which, to a high extent, represent coherent actions. This would warrant a rating of A under the assessment criterion 2.11 of Annex V of the RRF Regulation 3.12. REPowerEU Romania’s REPowerEU chapter is expected to have a lasting impact on reducing fossil fuel consumption and greenhouse gas emissions and increasing the uptake of renewable energy. The chapter includes an important reform aiming at facilitating the identification of acceleration areas, for a swifter deployment of new renewable energy plants. This reform is complemented by two investments aimed at deploying renewable energy. The plan also includes setting up one-stop- shops dedicated to providing information and assistance to individuals for the installation of renewable energy equipment and for energy efficiency renovations. This reform is complemented by an investment aimed at deploying solar energy on single-family residential buildings, and two investments to improve energy efficiency in the country by renovating public and private buildings respectively. By financing an investment aiming at improving the electricity network, the REPowerEU chapter submitted by Romania aims to improve the maintenance and efficacy of the transmission network, facilitating the connection of new renewable energy plants and ensuring better security and reliability of the infrastructure. Energy poverty is addressed by the introduction of an investment setting up a grant voucher scheme to make energy efficiency improvements to households, with a focus on vulnerable energy consumers and households affected by energy-poverty. 27 The plan is also expected to contribute to an accelerated requalification of the workforce towards green skills with a focus on developing skills in clean technologies needed for the deployment and use of renewable energy sources. The REPowerEU chapter is coherent with Romania’s original RRP and extends its ambition in terms of green transition. The chapter further increases the ambition of component 5 (Renovation wave) of the original plan with a focus on energy efficiency renovation of public buildings. The chapter continues to support Romania’s effort to greening its energy mix with two reforms to simplify the procedures necessary for renewable energy deployment. Finally, consultations were held with relevant stakeholders in the preparation of the REPowerEU chapter. An inter-ministerial working group was set-up to prepare the plan. The draft was presented to the RRP monitoring committee composed of representatives of non-governmental organisations and representative trade unions and employers’ associations, representatives of associations of local public administration (National Union of County Councils of Romania, Association of Romanian Municipalities, Association of Romanian Towns/Small Urban Municipalities and Association of Rural Municipalities of Romania), as well as representatives of the Economic and Social Council. They had the opportunity to make suggestions. In March, a public consultation was organised, as well as a public event with the participation of business representatives, civil society and stakeholders. Comments and proposals were sent by stakeholders to the Ministry of Investments and European Projects. Following these consultations, a new draft of the chapter was prepared. *** Taking into consideration the assessment of all the measures envisaged in the REPowerEU chapter, the chapter is expected, to a large extent, to contribute effectively to energy security, the diversification of the Union’s energy supply, an increase in the uptake of renewables and in energy efficiency, an increase of energy storage capacities or the necessary reduction of dependence on fossil fuels before 2030. This would warrant a rating of A under criterion 2.12 of Annex V to the RRF Regulation. 3.13. Cross-border or multi-country dimension or effect Most measures included in Romania’s REPowerEU chapter have a multi-country or cross-border dimension. The REPowerEU chapter is expected to contribute to reducing dependency on fossil fuels and to reducing energy demand. In particular, a majority of the measures in the REPowerEU chapter support the deployment of renewable energy sources and reduction of energy demand in buildings. The estimated costs of the measures with a multi-country dimension or effect included in the REPowerEU chapter represent 96.5% of the total estimated cost of the chapter, which is significantly above the 30% indicative target. 28 Table 3 – Cross-border or multi-country dimension of REPowerEU measures REPowerEU measure Costs (EUR Contribution to the million) target in % Creating a legal framework for the use of state land 3.01 0% as acceleration areas for RES investments Setting up one-stop-shops (OSS) to provide energy 0% advisory services for energy ef