Europe debates impact of emission targets on trade

08 July 2008 12:57  [Source: ICIS news]

STRASBOURG (ICIS news)--European member states are debating how sectors such as the chemical industry will be affected by proposed changes to EU emissions trading scheme (EU ETS) targets, French ecology minister Nathalie Kosciusko-Morizet said on Tuesday.

 

Speaking after a debate in the European Parliament on the inclusion of airline emissions to the EU ETS, Kosciusko-Morizet said discussions were still ongoing between national governments and the European Commission (EC) on how to assess the industries most exposed to international competition - and on how to help them compete.

 

Chemical companies, lobbying parliamentarians in Strasbourg this week, said they were particularly open to competition from producers in countries such as the US, China, Russia and the Middle East, which were not subject to the ETS.

 

And with proposals from the EC to stop the system of free allocation of emissions allowances from 2020 at the latest, the chemical industry was concerned that the added cost of having to buy allowances would lead to the end of chemical production in Europe.

 

But Kosciusko-Morizet said the French government, which currently held the rotating EU presidency, was keen to broker a deal on how different business sectors would be treated under the revised EU ETS.

 

“We are very aware of this issue of competitiveness,” she said. “We know that some sectors are more likely to be impacted by international competition than others, and we believe that we need to agree on how to deal with these sectors if we want to reach a deal on the EU’s energy and climate change package as a whole by the end of the year.”

 

The EC had called for an assessment of which sectors were the most likely to be impacted by the changes to the EU ETS to be made in 2011 but with the new system expected to be up and running in 2012, this was considered far too tight a deadline by many. Chemical companies also wanted this issue to be resolved before then.

 

“The politicians all tell us they do not want to push the chemical industry out of the EU,” said one industry executive who asked not to be named.

 

“But the question is do they have the political will to decide which sectors are most subject to the risk of carbon leakage [competition from companies outside the EU]?” he added.

 

“The EC and EP [European Parliament] want to postpone any decision on that until after Copenhagen [where a new round of climate change talks will take place in 2009] at the earliest but we think it needs to be decided now, as part of the whole reform of the EU ETS,” he said.

 

Kosciusko-Morizet said the debate at national government level was focused around the issue of so-called “border adjustments” which, if agreed, would oblige companies based outside the EU in certain sectors, most probably including the chemical industry, to “buy” quotas if they wanted to import into the EU.

 

Some countries felt that there was no need to impose such quotas, while others saw it as vital to support EU industry, she said, adding that the debate on this issue at last week’s informal meeting of EU environment ministers in Saint Cloud, France, had been “lively”.

 

She added ministers were also looking at ways in which companies could be rewarded for taking action to reduce their emissions, or for their wider contribution to the fight against climate change, although no concrete proposals had as yet been made.

 

Last week the German chemical industries association (VCI) said the EU ETS was its largest threat to long-term growth.

 

Carbon dioxide (CO2) emissions from petrochemicals, ammonia and aluminium will be included in the EU ETS regulations post-2013, following an EC announcement in January.

 

The EU ETS is a Europe-wide scheme which aims to reduce CO2 emissions and combat the serious threat posed by climate change.

 

To discuss issues facing the chemicals industry visit ICIS connect

By: Chris Jones
+44 20 8652 3214

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