EU ETS changes will not force ‘leakage’ - study

03 December 2008 18:11  [Source: ICIS news]

PARIS (ICIS news)--Changes to the EU’s Emissions Trading Scheme (EU ETS) will not force chemical companies to relocate, according to a new study.

For most chemical companies, the impact of having to buy carbon emission rights after 2013 will be small, according to the study by Climate Strategies, a European network of climate policy experts.

The European Commission and Parliament have proposed a gradual phase-out of free allowances by 2020, with final a decision in 2011 on which substances are at risk of “carbon leakage” – the relocation of production facilities, jobs and emissions to outside the EU.

Many chemical companies have claimed that unless they continue to receive CO2 allowances for free, they will be forced to relocate.

This has led many EU member states to call for free allowances for all energy and carbon-intensive industries until 2020 if their cost increase exceeds a threshold level.

But the study suggests that only a small number of chemicals are likely to be affected by carbon leakage, and that they will need some form of support to compete on price with rival products that are not subject to the EU ETS. 

In addition, the study said that the Commission’s proposed 2011 decision on which products are most at risk from carbon leakage must be carried out properly, with product-specific analyses.

The report’s co-author, Dr. Karsten Neuhoff, from the University of Cambridge, warned that there are “huge drawbacks in rushing to a simplistic solution of free allocation for all” and that “solutions need to be tailored to the small number of activities for which there is a real problem”.

“Protecting all the most polluting activities from the real cost of carbon is not the way to get industry to invest in the creative solutions to climate change,” she said.

To discuss issues facing the chemical industry go to ICIS connect

By: Chris Jones
+44 20 8652 3214

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