InterviewZAP backs CO2 appeal as Poland takes on EU Presidency

30 June 2011 17:54  [Source: ICIS news]

LONDON (ICIS)--Zaklady Azotowe Pulawy (ZAP) is backing Poland’s appeal to the European Court of Justice against the EU’s plan to tighten the allocation of free carbon emission permits to industry, the company’s CEO, Pavel Jarczewski, said on Thursday.

Jarczewski said that in his opinion “the positions of the Polish fertilizer and chemical industry and of the Polish government are convergent” when it comes to the EU’s proposed new emissions trading system (ETS), due to take effect in 2013.

Research indicated that the adjusted ETS would drive up production costs within the Polish chemical industry by approximately 20%, with the price of emission allowances assumed at approximately €30 ($43.50) per tonne of CO2, said Jarczewski.

Poland’s assumption of the six-month rotating EU presidency comes into effect as of 1 July.

“However, the estimate does not yet reflect the expected rise in electricity prices triggered by other factors,” he said. “Such higher costs will lead to end-product prices becoming uncompetitive not only in comparison with prices offered by non-EU producers but also by EU-based companies.

“If European chemical producers lose their competitive edge vis-a-vis their non-EU peers, demand may grow for products from countries where the emissions regulations do not apply, leading to increased emissions from obsolete plants located outside the EU,” said Jarczewski.

“The proposed solutions seem not to reflect the fact that European plants are the most efficient producers with lowest emission levels, thanks to the already adopted regulations whereby we are obligated to invest significant resources in technologies enhancing environmental protection,” he also said.

In its strategic planning, ZAP – Poland’s largest fertilizer producer and also a major melamine and caprolactam (capro) producer – did not rule out the possibility of moving operations to locations abroad with cheaper production potential, the CEO said.

“Unfortunately, the solutions proposed by the European Commission tend to limit the output of the chemical sector in Europe. As a consequence, we must take certain steps with a view to securing our presence on the market,” he said.

In its appeal to the court, the Polish government is to maintain that the ETS changes are disproportionately harmful to the country because it relies on the burning of coal for 95% of its electricity, the result being that it now faced a challenge with regard to emissions.

“Our aim is to make the European Commission aware of Poland’s different energy generation profile so that we could be granted long transitional periods necessary to adjust the country’s coal-fired power units to the EU requirements,” said Jarczewski.

“The EU officials seem to overlook the fact that pushing fertilizer and chemical production out of Europe will increase rather that reduce the global CO2 emissions, as fertilizers will be produced in older but price-competitive plants located outside the EU which are not burdened with costs of CO2 emission allowances.

“We would also like to change the current definition of electricity generation contained in the guidelines to ‘derogations’, published without any prior consultation on 31 March 2011 – the guidelines pertain to Article 10c of Directive 2003/87/EC. Application of this definition will in practice eliminate industrial power generation capacities as an energy source for technological processes,” said Jarczewski.

($1 = €0.69)

For more on caprolactam, visit ICIS chemical intelligence

By: Will Conroy
+44 20 8652 3214

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