Chemical industry optimistic after ETS aviation vote

08 July 2008 16:36  [Source: ICIS news]

STRASBOURG (ICIS news)--Chemical producers are hopeful that the European Parliament will listen to their pleas on proposed changes to the EU emissions trading scheme (ETS), industry representatives said on Tuesday.

Irish deputy Avril Doyle will later this year put forward proposals on changes to the EU ETS post-2012, but the adoption by parliament on Tuesday of a separate proposal, to include aviation emissions in the ETS for the first time, has given the chemical industry hope that its message is getting through.

“We want to see the practice of benchmarking applied to the ETS,” said Joachim Krueger, executive director of European chemicals association Cefic, speaking in Strasbourg after the vote.

“We are therefore pleased that the principle has been included in the proposal on aviation emissions.”

Members of the European Parliament (MEPs) backed plans by German deputy Peter Liese to set a single European standard for airline emissions, with companies faring better than the standard benefiting from cheaper emissions allowances.

Cefic would like to see similar schemes in place for the various different sectors of European industry which would take into account each sector’s investments in innovative technology and the impact of their output on climate change.

“If benchmarking is not taken into account, it would effectively be punishing those companies that have made technological investments to reduce their emissions,” Krueger said.

“We want to see a situation where a Europe-wide benchmarking scheme is in place for our industry, allowing those firms that have invested to keep their emissions allowances for free, while forcing those firms that have still not improved their processes to pay for the right to emit - an incentive for them to invest in improvements..”

“The chemical industry produces a lot of products that are used in technologies to tackle climate change, and we want that to be taken into account when the rules are changed,” said Krueger.

Krueger said that the chemical industry in Europe had detailed eight major production processes where benchmarking could take place, covering 90% of greenhouse gas (GHG) emissions.

“We will have these benchmarks ready to present to the lawmakers at the end of the year, and we are willing also to agree to commitments based on these benchmarks if that is what the EC and EP ask of us,” he said.

The current proposals from the European Commission being debated by Doyle and her fellow MEPs would see an end to the free allocation of allowances and the introduction of an auction for some or all of the emissions certificates.

“An auctioning system would take away the incentive for companies to innovate,” said Krueger, who wants the status quo maintained.

But he was not concerned that the decision to introduce partial auctioning of emissions allowances for the airline sector - 15% of emissions will be subject to auction - would inevitably lead to a similar scheme in other industries.

“We are optimistic that our position on auctioning is being heard and understood,” he said.

Chemical producers say that effectively forcing them to pay for the right to do business in Europe will inevitably lead to their relocation to other parts of the world where the ETS does not apply.

What is needed, Kruger said, is a global agreement on reducing emissions, and he said that the industry was working with its counterparts in other areas of the world to achieve that goal.

“We know that our Japanese competitors have also identified a similar number of processes that can be benchmarked, and while our colleagues in the US are rightly waiting to see how the new president tackles climate change issues, we feel there is a willingness on the part of the industry as a whole to find a global solution.”

And he was dismissive of calls from some quarters for a so-called border tax adjustment on imports into the EU that would, in theory, offset the impact on competition that the auctioning of emissions allowances would create.

“We do not feel that such taxes would work, for two reasons.

"First, they would almost certainly lead to retaliatory taxes on exports from the EU, and since we export 25% of our output, that would simply increase the cost on European chemicals producers.”

“Second, the proposed tax would not cover products imported into the EU made using chemical products produced outside the bloc, only the chemical products themselves.”

“So someone producing a mobile phone in China for example and importing it into the EU would not be penalised at all for using plastic made from chemicals produced in Asia, making the tax meaningless.”

Speaking at a press conference after the aviation emissions vote, Liese hinted that MEPs were keen to look more closely at the issue of sector-based approaches to emissions.

He added that just such a change, increasing the demands on air carriers to the benefit of other industry sectors, could well be included in Doyle’s final proposal, although he added that it was too early to be sure.

To discuss issues facing the chemical industry go to ICIS connect

By: Chris Jones
+44 20 8652 3214

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