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Austrian steelmaker abandons carbon allowance lawsuit plans

15 Feb 2013 17:43:07 | edcm

Austrian steelmaker Voestalpine has abandoned plans for a national court case against European Commission rules regulating the number of free carbon emissions allowances the steel sector can receive during phase III of the EU's emissions trading system (ETS). Steel is the second biggest industry in the system.

In June last year, the European Court of Justice (ECJ) threw out two challenges, one by European steel lobby Eurofer and one by steel producers Voestalpine, Hüttenwerke Krupp Mannesmann (HKM), Rogesa - Roheisengesellschaft Saar, Salzgitter Flachstahl and ThyssenKrupp Steel.

The groups had challenged the terms of the benchmark used to set out the steel sector's allocation of free allowances in phase III. The ECJ said the cases were inadmissible because the companies had not gone to their national courts first.

Voestalpine then said it would mount a fresh court challenge to the carbon efficiency benchmark for steel, and steel majors in other EU states said they will do the same in their own national courts this year (see EDCM 28 June 2012).

But the Austrian company has now changed its plans. "Voestalpine has decided not to file a suit in Austria because the foreseeable very long procedure would make any actual implementation of such a ruling highly unlikely," the company told ICIS.

NIMs delay

ThyssenKrupp, meanwhile, said it still has to take a decision. "Since there are still no legally binding German allocation decisions, we are currently in no position to pursue our assessment of a national court case," the company said.

The European Commission is late finalising member states' National Implementation Measures (NIMs) - the plans allocating the number of free allowances each installation is entitled to receive - so the amount of free allowances detailed in the member states' provisional versions might be cut (see EDCM 28 January 2013).

At the time of going to press, the Commission had not replied to ICIS' request to it for comment on the expected date of the NIMs finalisation.

In its latest financial results, Voestalpine said the delay was making impossible any statement regarding the CO2 cost burden for phase III (see 8 February EDCM 2013).

Eurofer said said the remaining steel companies are still deciding whether to launch legal action at national level.

Price reason?

A sharp fall in carbon prices since the original lawsuit was launched could have made legal action less urgent for steelmakers, even if Eurofer rejects abandoning its own suit.

At the time of filing its court case, in 2011, Eurofer calculated that the application of the benchmark would have cost the industry €600m/per year, assuming a shortfall of 20m EUAs per year. To make the calculation, the lobby group used a carbon price of €30.00/tonne of CO2 equivalent (tCO2e), saying that was "the level forecasters predict carbon prices will reach by [2020]".

On 1 April 2011, the benchmark EU 2011 allowance contract was worth €17.15/tCO2e, a premium of €11.85/tCO2e to the ICIS close of the 2013 contract on Thursday (€5.30/tCO2e). This means that 160m allowances at the current price are worth €848m, while they were worth €2.7bn in June 2011.

"It is still worth going to court because the benchmark is not calculated correctly," Eurofer told ICIS. The lobby group said: "It must not become an unquestioned standard that might be used for any assessment of the steel industry's potential to meet climate targets." Silvia Molteni

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