Steel industry challenges CO2 benchmarks in court
The steel industry is taking the European Commission to court in an attempt to get more free emissions allowances in phase III of the EU emissions trading system (EU ETS). Around 160m allowances are being contested, which could halve the steel sector's forecast shortfall in phase III, according to industry estimates.
Eurofer, the association representing the steel industry in Europe, said on Monday that it would seek an annulment of the Commission's benchmark decision for primary steel making, to come into force when phase III starts in January 2013.
The benchmarks are on track to be approved by the EU lawmakers in mid-April, after earlier attempts to derail them in the European Parliament failed (see EDCM 16 March 2011). This means any steel maker emitting more than 1.48 tonnes of CO2 per tonne of product would have to buy allowances in the market, a Commission spokeswoman said.
But Eurofer argues that the steel benchmarks break EU emissions law, by not taking into account that some waste gases are used to replace primary fuels and therefore cut final emissions. The Commission has only taken into account around 85% of the CO2 emissions from waste gases in the steel-making process, instead of 100% as Eurofer wants, a spokesman said via e-mail.
The association estimates that by excluding waste gases, the Commission will force the steel sector to buy around 46m EUAs per year in phase III − an extra 20m per year, adding up to a total of 160m.
Using current ICIS Heren quotes for EUA Year 2013-2014 and ECX quotes for contracts further out, this would peg the extra cost to the steel sector at €3.6bn, assuming Eurofer's predictions on production rates come true.
When asked for comment, the Commission said the steel sector is expected to post a surplus of 370m EUAs in phase II, which they could then use in phase III.
Emissions from the steel sector remain much lower than its free allocation in phase II, despite rising production rates in 2010, recent EU data shows (see EDCM 1 April 2011). This means the sector will be able to bank a large surplus of allowances for use in phase III.
There is no time frame yet for when the case would be heard in the European courts. It typically takes several years for a verdict to be reached. For instance, it has taken five years or more for verdicts to be reached on court cases launched by member states against their phase II allocation of allowances.
The Commission was unavailable for comment at the time of publishing. IS
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