INSIGHT: Cefic tries to show the way on CO2 benchmarking

24 December 2008 11:00  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--The chemical industry wants to know exactly what the EU authorities mean by “carbon leakage”. More precisely, it needs to understand what parts of the sector and the downstream industries its serves can expect some relief from the more onerous carbon control measures voted through by the European Parliament last week.

The EU wants to push ahead with measures to cut carbon emissions by 20% by 2020 compared with 1990 levels. What the cutbacks might mean for energy intensive industries have yet to be fully laid out but the financial and technical impact could be significant.

Those who follow the global drive for stricter climate control closely, understand that the potential cost burden on the chemical industry could be immense.

Installations included in the EU’s Emissions Trading Scheme (ETS) that are in sectors exposed to a significant risk of carbon leakage will be allocated 100% of emissions allowances free of charge at the level of the benchmark of the best technology available after 2012, ICIS news reported recently.

‘Carbon leakage’ is the practice of companies moving factories to countries outside the EU with less stringent rules on carbon emissions.

But chemical producers need to know sooner, rather than later, whether their plants will be included in the relief mechanism: a decision either way will undoubtedly affect their investment plans.

There is a great deal of work being done now behind the scenes to help define which parts of  the chemical industry – and which downstream sectors – might be included in the relieve mechanisms by the EU executive: the European Commission. The commission works on so called NACE sector codes. Some delineations in chemicals could be made on a cost per tonne basis.

Currently it may appear as if the industry is worrying too much – environmentalists have suggested that the 20% carbon cut will work out in Europe to be more like 4% to 5% between now and 2020 because EU countries are allowed to accomplish approximately three quarters of their climate control effort outside EU borders. But that is really not the case.

Much stricter EU climate control can tip the playing field against chemicals production in Europe and once gone, producers would be unlikely to return.

The industry is putting resources behind its global benchmarking plan which it wants to see recognised as a valid alternative to the auctioning of carbon credits. This cartoon from Cefic helps explain why in a humorous way. The tone may be light but the message is not.

The benchmarking versus auctioning debate is not a topic reserved for an elite of specialists the trade group says. We benchmark every day when we compare product performance with price. Benchmarking helps reward those who have worked hard already to combat climate change and can be used eventually to help those who might do so.

Companies need to be competitive to provide innovative solutions for a sustainable climate solutions management, the industry says. It believes that additional CO2 expenses that would not be allocated to favour low carbon technologies would not help efficient climate change efforts.

To discuss issues facing the chemical industry go to ICIS connect

By: Nigel Davis
+44 20 8652 3214

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