Brussels, 20/05/2010 (Agence Europe) - A few days before 26 May, the expected date of the European Commission communication on the possible effect of increasing the EU's CO2 reduction target from 20% to 30% by 2020 and on the precise situation on industrial sectors exposed to significant risk of carbon leakage (see EUROPE 10142), controversy is swelling over the real extent and the impact of the risk of relocation of European industry to countries where standards are less stringent than in the EU in terms of tackling global warming beyond 2012.
In response to lobbying by industry and certain EU member states, such as France and Italy, which are calling urgently for an adjustment mechanism at the borders and for this instrument to be used as a political lever in current climate negotiations, the Greens/EFA Group in the European Parliament published the findings of a study on carbon leakage in Europe, in Strasbourg on Thursday 20 May. This study challenges the validity of the arguments being put forward by industry and some governments on the risks which tackling climate change will bring to bear on the competitiveness of European industry. “Tackling leakage in a world of unequal carbon prices”, a study carried out by the research institute Climate Strategies at the request of the Greens/EFA, assesses the true extent of carbon leakage and the possible political options for resolving the problem.
The study concludes that: - the threat of carbon leakage has been seriously overstated to avoid putting in place effective regulatory measures to tackle climate change: governments have continued to skew eligibility criteria towards “sectors at risk”, thereby making allocation of massive, counter-productive quotas free - indeed as few as 13 of the 164 sectors identified on the basis of the criteria introduced in the emissions trading scheme directive would truly be at risk of carbon leakage, particularly aluminium, cement and steel; - the free allocation of EU emissions permits under the emissions trading scheme is not an effective measure for addressing carbon leakage for many of the limited number of sectors that are at risk, and, further, the free allocation of quotas severely restricts the role of encourager that the carbon market would have for companies; some companies (such as Lafarge and Arcellor-Mittal) and sectors are taking advantage of this system of over-allocation of quotas to build up income of several hundreds of millions of euro; - given the major problems related to the free allocation of missions permits, full auctioning of emissions permits must be activated as soon as possible; - to tackle carbon leakage in some sectors where risks are acknowledged, adjustment measures at the borders (carbon inclusion mechanism) have to be considered only in place of free allocation of quotas and not instead of them.
Carbon leakage harms climate as much as European competitiveness, say French diplomats
Among French diplomats who are circulating a note in European circles on the “carbon inclusion mechanism” which Nicolas Sarkozy would like to see implemented, it is pointed out that: - the free allocation of quota provided for in the ETS directive is subject to benchmarking based on the best current performances in the sectors concerned (this is being carried out at the Commission) and so will only benefit 10% of firms which are doing best on climate: with the gap between best and least good technologies being between 30 and 50%, there is a real problem of carbon leakage that has to be resolved, and the time has come to get down to this task; - the instrument which consists of including importers in the ETS only seeks to maintain current competition conditions and would be used as a last resort to counter the major risk brought by carbon leakage not only to European competitiveness, but also to the climate, which stands to lose if the same tonne of carbon is produced more cheaply elsewhere on the planet than in Europe - the best indication that this is not a protectionist instrument is that income generated by importers' restoration of the volume of quotas corresponding to the amount that European producers would have to buy on the market for the same quantity of goods could be put towards clean technologies in developing countries; - a carbon inclusion mechanism is technically feasible, since it would concern only certain industrial sectors (major semi-finished products, such as steel, glass, aluminium and cement) and some producer countries (such as China, India and Brazil) and because the account taken of the carbon intensity of products made in third countries would be based on the average inclusive cost (without the need to measure the precise emissions related to making the product imported, from China for example).
Only on 26 May will it be known the direction that the College of Commissioners has agreed to take. (A.N./transl.rt)