It’s on Google’s end. “I have inventory (a placement) to sell to an advertiser. I can sell it to X with a CTR of (10% or 1%) and a CPC of $0.50 or to Y with a CTR of 3% and a CPC of $1.”
Whether X’s CTR is 10% (what it used to be) or 1% (what it is now) drives the decision of which ad is better to serve in that inventory slot.