EC set to grant industry relief on carbon trading

EC set to grant industry relief on carbon trading
Published: 14 October 2008

Recent speculation that energy-intensive industries in Europe are set to receive a huge cash boost from the European Commission as part of a plan to protect industry from a world recession are proving correct with EU leaders set to debate such proposals in Brussels next month. This will come as welcome news to the region’s cement industry which is facing the threat of higher costs from purchasing carbon permit allowances under the Emisson Trading Scheme (ETS) and follows intense lobbying by the German heavy industrial sector as well as from Poland and Spain all of which regard the present system as unjust and over-penalising European production and output levels.

Günter Verheugen, European Commissioner for enterprise and industry in an exclusive interview with the UK Observer newspaper said the move will prevent hundreds of thousands of job losses in the EU industrial sector amid the worst economic conditions for decades. He also said that European industrial powerhouses are refusing to invest in new plants and businesses in the Eurozone because they claim compliance costs caused by the emission trading scheme makes new ventures too costly.

The move will provoke opposition from green groups who will interpret the measures as a signal that Europe is putting economic concerns above environmental imperatives a claim countered by Verheugen who said that the allowance would be restricted to firms which invest in the most modern ’sustainable’ technologies.

"Doing nothing on the environment will cost more than taking action [but] it makes no sense to force certain industries to leave Europe. They will take jobs and their pollution" Verheugen said.

A timely report just released by Cembureau entitled : Carbon leakage – European cement industry at risk – concludes that clinker and cement production in the EU will be seriously affected by carbon leakage. As a consequence, the relocation of clinker production to countries with no carbon constraints will accelerate from 2013 and will continue in the following years.

At current CO2 prices of €25/t, approximately 80 per cent of clinker production will be offshored if no free allowances are allocated. This would heavily affect employment and the gross value added (GVA) generated by the industry. With full auctioning at a price above €35/t of CO2, integrated cement production would be wiped out of the EU.  Recognition of this fact is urgently needed as any delay is already impeding investment decisions in the EU. “In order to assess the risk, we need to take a pragmatic approach, that of a good, reasonable businessman looking at the future” stated Dr Jean-Marie Chandelle, Chief Executive of Cembureau.