INSIGHT: Chemicals trying to stem carbon leakage

17 March 2008 18:07  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--The European chemical industry seems to be playing a dangerous game on climate change.

Some companies are big carbon ‘polluters’ and will have to pay if the EU is to meet its climate control goals. Others further down the chemical product chains have a much smaller carbon footprint.

But can Europe have one without the other?

The region’s politicians have their knives out for heavy industry. Unloved, and increasingly it seems, unwanted, sectors sych as metals, cement, glass and chemicals potentially will bear the full impact of the EU’s climate change policies.

Yet smaller, more specialised chemicals makers will also suffer as climate control costs rise and energy prices are subsequently pushed higher.

Unfortunately, it seems as if there are few who care. The industry has been told plainly that its problems are far outweighed by the desire of Brussels to meet its climate control goals.

The European Commission made it clear earlier this year that it would wait until at least 2011 before it revealed any details of exemptions from its far-reaching climate control proposals.

Knives are drawn on this debate like no other as the EU tries to firmly establish its credentials before the next round of talks to seek a globally acceptable climate control timetable.

And the EU’s chemicals makers are increasingly marginalised in talks seemingly on weightier matters that time and again look as though they are putting the environment first with little regard to sustaining industrial or indeed economic development.

At least EU ministers meeting last week paid some heed to gathering economic storms. But it was left to German chancellor Angela Merkel to speak out plainly in support of threatened industry.

She finally garnered support for manufacturing industry from member states, including France, Austria and the Czech Republic.

The European Commission has acknowledged that its proposals will have a considerable impact on some sectors. But it refuses to name them or, to provide a list of exemptions.

It has used the term ‘carbon leakage’ to describe the threat of the drift of industry out of Europe.

The 27 heads of government said they are committed to finish negotiations on the climate control package by the end of the year.

They want to persuade the world’s big carbon emitters, including fast-growing India and China, to commit to sweeping carbon reductions.

The chemicals sector, however, has been buried in this debate despite the current high-level group meetings between European industry, politicians and stakeholders that have looked at climate and energy policy.

It has proposed eight sector segments that will face the greatest impact from stricter climate control, including the chlor-alkali business, but its ideas have been rejected.

It firmly believes in free allocation of carbon credits for the next stage of Europe’s emissions trading scheme (ETS). The commission is pushing for the introduction of a controversial auctioning process.

No doubt the EC wants to keep the debate simple, but the message has to be put across that chemicals makers of different types are vitally important suppliers of products used in wider industry.

One part of the sector may not easily survive in Europe if carbon leakage prevails. There is a real danger of divide and rule.

The chemicals business needs to make its case more strongly as the EC’s proposals are put to parliament and the member states.

The EC is no longer the main driver behind the EU’s climate control plans so political lobbying at the national and European level comes further to the fore.

Chemicals may not have attracted much media or public attention in Europe’s debate on climate change, but the core competitiveness of the sector is threatened by ill-conceived measures for climate control.

By: Nigel Davis
+44 20 8652 3214

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