Brussels, 21/03/2016 (Agence Europe) - Cefic (European Chemical Industry Council) has called, on behalf of the European chemical industry, for long-term reform of the emissions trading system (ETS) which takes account of the reality of investment leakage in energy-intensive sectors, such as the chemical industry and does not penalise this sector by increasing the cost of energy.
While researchers may have found no evidence of carbon leakage (see EUROPE 11512), it is because “they studied the period before 2012 when around 96% of carbon allowances were allocated for free”. “While there may be little evidence of simple carbon leakage, it is clear that investment leakage is already happening”, Cefic warned on 16 March.
The proof of this is there: data already show the declining investment by the EU chemical industry in favour of other global regions, such as China, which has overtaken Europe and now holds the top ranking in worldwide chemicals sales, states Cefic.
Energy-intensive industries facing the prospect of a substantial long-term increase in their energy costs will think twice before making these decisions, Cefic points out. It takes the view that current proposals for the reform of the ETS are giving the wrong signal as even the most carbon-efficient undertakings would have to purchase an increasing proportion of their allowances at an ever higher price.
“Let's not wait until too late to send a clear signal to industry that carbon efficient businesses can remain competitive, innovate and grow within Europe. Our industry is at the heart of a strong European economy, and accounts for more than 1.2 million jobs. In terms of environmental performance, we have slashed our greenhouse gas intensity by 75% since 1990 with total emissions dropping by 58% in that period”, states Cefic in a press release.
In the view of the sector, the formula for a future competitive and innovative EU has two elements:
a system of free allocation based on real data on carbon efficiency and on real, rather than historical, production levels, which enables best performers to produce and grow their business in Europe without incurring a carbon penalty. “This ensures ETS incentivises companies to invest in carbon efficiency, rather than investing elsewhere”, Cefic stresses;
innovating the clean, competitive energy of the future within the EU. “Our industry is energy intensive. If we can innovate down the cost of low-carbon energy to the point where it is competitive, market forces will take over to cut greenhouse gas emissions and tackle manmade climate change”, states Cefic.
Some stakeholders are calling for a tiered approach, in which industrial sectors are put into different categories according to the perceived risk of carbon leakage. A proposal tabled by the UK and France would identify sectors as being at “high risk”, “medium risk”, “low risk” or “no risk” of carbon leakage (see EUROPE 11418).
Cefic backs the approach proposed by the Netherlands, which recommends amending ETS so all sectors get full allocation at benchmark standards of carbon efficiency - a system of dynamic allocation which “rewards carbon efficiency and growth - better for the climate and Europe's economy”.
Cefic also wants allowances not used during the recession to be used in catching up on lost production because “there can be no economic recovery or growth without business, and energy-intensive industries like the chemical industry are a core part of this”.
The long-term reform of the ETS, proposed by the Commission in July of last year, seeks to provide a lasting, sustainable cure to the weaknesses which led to the drop in the price per tonne of carbon and a massive surplus of allowances on the market, preventing the ETS from playing its role in incentivising investment in clean technologies and renewable energy (see EUROPE 11364 and 11360). (Original version in French by Aminata Niang)