EU makes assurances to industries hit by climate rules

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EU makes assurances to industries hit by climate rules

2008-02-29 by renewenergy

Europe’s metal and paper industries may be given free emission allowances during the post-2013 phase of the EU carbon market, the Commission indicated in two communications announced this week. Brussels is hoping to prevent energy-intensive sectors from fleeing the EU as the bloc’s carbon market becomes tighter.

Background:

The Commission on 23 January announced plans to beef up the EU’s Emissions Trading Scheme (EU ETS).

But the proposals delayed making a decision over which industries could benefit from either free CO2 emission allowances or a tax on imports from competitors operating in countries with less costly environmental rules.

Other related news:

Preventing ‘carbon leakage’

“It is not in the interest of the European Union that in the future production moves to countries with less strict emissions limits,” the Commission notes in its communication in support of the metals sector, announced on 25 February.

The EU executive is waiting on the outcome of ongoing international climate change negotiations, launched in Bali in December 2007, and has abstained from giving a clear ‘yes or no’ answer to questions about how Europe’s energy-intensive industries could be protected in the event that the climate talks fail to produce a global deal under which competiting producers in third countries would be subject to EU-style emissions caps.

EU industries are complaining that the lack of certainty is affecting business decisions, and have stepped up warnings about the potential for ‘carbon leakage’, meaning the relocation of energy intensive factories and jobs beyond the EU’s borders (EurActiv 27/11/07).

In the absence of a clear industry protection framework, the Commission is making public assurances. “We should support them in this effort through a policy framework which allows this important sector to remain competitive, while contributing to our ambitious climate change and energy policies,” EU Industry Commissioner Günther Verheugen said in a 27 February press release announcing the Commission’s communication on forest-based industries.

Verheugen made similar assurances to the metals sector, which “must be able to compete on a level playing field with their global competitors,” he said.

Buying time?

But before the Commission can determine how to level the playing field, ”a lot of technical work needs to be done,” according to Jos Delbeke of the Commission’s Environment Directorate, who spoke with EurActiv in an interview.

“The Commission is giving itself a bit of time to do the work. Not that we are going to let it linger on but there is a little bit of homework to be done. And the emphasis is of course on the conclusion of an international agreement, which could sort out most of the problems that we are encountering on carbon leakage,” he said.

Global supply crunch

In addition to concerns about the cost of production-related emissions, EU producers and exporters of metals and forest-based products like paper are faced with increasing global competition for shrinking raw material stocks.

Global raw material use has been rising steadily since the 1980s, according to United Nations figures, and is being driven by growing populations and rising incomes across the developing world, notably China and India.

“The economic development of many emerging economies has contributed to an increase in the demand and prices for metals and metal products and has led to unprecedented pressure on raw materials supplies and prices,” according to the Commission.

For paper products the picture is similar. ”The access to and availability of new and recovered raw material at competitive prices and the strategic role of this sector in limiting climate change are issues which need to be addressed specifically in order to provide the right framework conditions within which this industrial chain can prosper and grow,” the Commission said.

Positions:

CEPI, the Confederation of European Paper Industries, welcomed in particular the Commission’s signals that the paper industry may be given free emissions permits under EU ETS. “For the European paper industry to remain competitive it is essential that it continues to be recognised as an energy-intensive industry,” CEPI said in a press statement.