European Parliament fails to address industry concerns on Emissions Trading

The European Parliament Environment Committee today adopted the Commission proposal for a revision of the EU Emissions Trading System (EU ETS).

The steel industry is disappointed that, though the proposal has been improved, the core problems of the cap (21% by 2020 compared with 2005) and of the international competitiveness (risk of carbon leakage), in particular through auctioning of the allowances, have not been solved. A huge uncertainty about which sectors will be determined to be at risk of carbon leakage and the amount of free allowances allocated to these remains (“up to 100% free allowances” based on ambitious benchmarks). Though the CO2 cost pass-through in electricity prices will now be taken into account when determining the sectors at risk, no compensation with free allowances is ensured. Sectors not at risk of carbon leakage will receive 85% (instead 80%) free allocation in 2013 decreasing to full auctioning in 2020.

In return the parliamentarians recognized the eligibility of waste gases for the allocation of free allowances, though the text does not give clarity to which extent. Waste gases account for about 50% of the emissions of primary steel making and therefore 50% of the costs caused by auctioning.

The Parliament will now enter into negotiations with the Council in order to find a first reading agreement in December under French presidency.

The steel industry now relies on the Council to provide the necessary framework for a sustainable ETS. We are confident that the Member States will recognize that only certainty and fully free allowances for industries exposed to international competition will prevent leakage.

We call upon the Council to

• ensure that sectors at risk of carbon leakage receive fully 100% free allocation, based on sector specific benchmarks, until an international agreement is in force that provides for a level playing field for competitors.
• ensure benchmarks that provide fully 100% of the allowances needed by the best performers.
• provide clarity that that installations generating waste gases receive free allowances at least at a level which is in line with the other allocation principles for that installations.
• compensate indirect costs caused by increasing electricity prices to the electricity consumer so to avoid carbon leakage.
• set criteria for an international agreement in order to ensure a level playing field for competitors (i.e. participation of a critical mass of global production, equivalent measures for competitors, verification system, and enforceability).

Represented by EUROFER, the European steel industry is the world leader in its sector with a turnover of EUR 140 billion and direct employment of 370 thousand people, producing 200 million tons of steel per year.

Contact

Gordon Moffat, Director General +32 2 738 79 26 (g.moffat@eurofer.be)

Axel Eggert, Director Public Affairs +32 2 738 79 34 (a.eggert@eurofer.be)