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Following today’s vote at plenary on the Emissions Trading System the Confederation of European Paper Industries (CEPI) is overall encouraged by the compromise text reached. There is much in the agreement that the industry can be positive about, retaining many of the key components of the compromise text agreed the Environment committee (ENVI) stage.
“The ETS has moved a step further on its pro-investment track. Although pitfalls still remain at Council level we are confident that the current text can be improved on” says Nicola Rega, Energy and Climate Change Director at CEPI
The industry commends several key aspects of the Parliament’s decision:
• Reemphasising the need for all sectors to contribute to reducing carbon emissions
• Encouragement of early movers investing in low-carbon technologies
• Maintaining flexibility in setting the auction share
• A first step in finding solutions to help member states with compensation for indirect carbon costs
• The development of a wider-ranging fund for innovation supporting industry transition towards a low-carbon economy
Unfortunately, the macro-agreement at the core of the decision by the Parliament still maintains traces of discrimination between sectors, ultimately rewarding those investing the least in carbon emission reductions. But we are confident that this environmentally and legally questionable element will be removed as the next stage of the negotiations. This would guarantee that fairness remains a core component of the ETS.
For more information, please contact Nicola Rega at firstname.lastname@example.org or by phone at (+32) 485 40 34 12
For press related enquiries, please contact Ben Kennard at email@example.com or by phone at (+32 487 39 21 82)
We, the signatories of this paper, energy-intensive sectors representing about 2 million jobs in the EU and comprising many SME’s, are under direct impact of the EU ETS and are recognized as exposed to carbon, investment and employment leakage.
We ask Members of the European Parliament to acknowledge the mutual importance of our sectors for the EU economy, in particular for European jobs in your constituencies, and all our economic value chains by fully rejecting any “tiered approach” to free allocation and voting against it.
In order to ensure an equal level playing field for all energy-intensive industries, we call for the rejection of all approaches which aim at discriminating a few from other sectors exposed to carbon leakage risks, namely: the “tiered approach” to free allowance allocation, the “tiered CSCF” and the “import inclusion mechanism”.
This discrimination between industrial sectors goes against the principle set in the October European Council Conclusions that best performing companies in ETS carbon leakage sectors should not bear further carbon costs. Indeed, it would ensure that even best performers in most sectors would bear significant carbon costs.
We appreciate that all policy makers want to avoid undue carbon costs to industry and the triggering of the cross-sectoral correction factor (CSCF, reduces benchmark-based allocation to undertakings). The fairest and most effective way to provide eligible companies with the allowances needed for controlling the carbon leakage risk and still avoiding the CSCF is to increase the free allocation share and to reduce the auctioning volume accordingly. However, we are concerned by the ENVI proposal to exclude only certain sectors from the application of the CSCF, via the so-called “tiered CSCF”. Other sectors in turn would be severely undersupplied. Again this approach would arbitrarily differentiate between different European industries. Protection of some sectors should not be achieved at the expense of the others. Such segregation would also bring into question the environmental integrity of the scheme.
Moreover, we are alarmed by the late introduction of an entirely new proposal for an “import inclusion mechanism” for sectors with lower trade intensity. This is discriminatory, legally questionable and would limit the ability of certain sectors to compete on a level playing field. The notion is contrary to the principal idea of the carbon leakage risk assessment being based on two main criteria (trade intensity and CO2 intensity) as the “import inclusion mechanism” only considers the former. Finally, it goes against the Paris Agreement which does not contain any suggestions allowing for unilateral trade measures. Overall, it introduces a major change to the future of the ETS scheme increasing the legal uncertainty for the ETS reform post 2020.
We reiterate our opposition to any differentiation between the energy intensive industries and under any form of the “tiered approach” and ask you to reject it in the Plenary.
Today’s vote in Environment Committee of the European Parliament marks another major stepping stone for the ETS review.
“There are no more doubts. The message from the Parliament is unequivocal: Game over for the tiered approach. The time has come to promote and reward low-carbon investments” says Nicola Rega, Climate Change and Energy Director at the Confederation of European Paper Industries (CEPI).
The vote reinforces the decisions already taken by the European Parliament’s Committee on Industry, Research and Energy in mid-October. It underlines the need for all sectors to contribute in reducing carbon emissions; flexibility in setting the auction share; a pragmatic solution to help member states with compensation for indirect carbon costs, and a wider-ranging fund for innovation.
The broad range of political support reached proves that the difficulties negotiators faced over the last months were worth it. We therefore fully congratulate the rapporteur, Ian Duncan, and the shadow rapporteurs Ivo Belet, Jytte Guteland, Gerben-Jan Gerbrandy, Kateřina Konečná, Eleonora Evi, Bas Eickhout and Mireille d’Ornano for their commitment to achieving a common position.
Although these are positive developments, a lot still needs to be achieved ahead of the Council negotiations. In particular, the solutions to address the impact of the cross-sectoral correction factor are far from satisfactory. The attempt to shield more than 50% of industrial emissions from this mechanism is unjustifiable from an environmental, economic and equitable perspective. It doubles the uncertainty connected to the CSCF for less carbon intensive sectors and limits their investment security for low carbon investments. In addition, the last-minute solution to include a border adjustment mechanism into the ETS raises more questions than answers.
A significant investment challenge lies ahead for European manufacturing industry to transform its production base and regain competitiveness. With our positive attitude we will constructively continue to engage with policy-makers to ensure that the ETS will work as a tool to reward low-carbon investments. It is high time we put the ETS on a pro-investment track.
For more information, please contact Nicola Rega at firstname.lastname@example.org or by phone at: +32 485 40 34 12
Today’s vote in the European Parliament marks a major stepping stone for the ETS review.
“This message reads loud and clear:
NO to a tiered approach on carbon leakage and YES to a dynamic and predictable benchmark’s reduction”
says Nicola Rega, Climate Change and Energy Director representing the Confederation of European Paper Industries (CEPI).
The proposed flexibility in setting the auction share together with proposed solutions to help member states with compensation for indirect carbon costs and the wider-ranging fund for innovation are also welcomed by our industry.
We recognise the efforts made towards reaching a broad political agreement embracing almost all the political groups. This is a very positive signal as it demonstrates the strong consensus behind this vote. We fully congratulate the rapporteur, Frederik Federley and shadow rapporteurs Esther de Lange, Edouard Martin and Hans-Olaf Henkel for their commitment to achieving a common position.
Although these are positive developments, more work needs to be done to address the text’s shortcomings, particularly on benchmarks, the impact of the cross-sectoral correction factor and on effective compensation for indirect costs across Europe.
A significant investment challenge lies ahead for European manufacturing industry to transform its production base and regain competitiveness. We will constructively engage with policy-makers to ensure industry’s viability and that the ETS rewards low-carbon investments. We urge the ENVI Committee to seize the opportunity to build upon ITRE’s lead and to put the ETS on a pro-investment track.
For more information, please contact Nicola Rega at email@example.com or by mobile: (+32) 26274918
Note to the Editor
CEPI aisbl - The Confederation of European Paper Industries
The Confederation of European Paper Industries (CEPI) is a Brussels-based non-profit organisation regrouping the European pulp and paper industry and championing the industry’s achievements and the benefits of its products. Through its 18 member countries (17 European Union members plus Norway) CEPI represents some 505 pulp, paper and board producing companies across Europe, ranging from small and medium sized companies to multi-nationals, and 920 paper mills. Together they represent 23% of world production.
Tiered approach impacts seriously the majority of energy-intensive industries in the EU and their associated value chains
We, the signatories of this paper, energy-intensive sectors representing about 2 million jobs in the EU and comprising many SME’s, are under direct impact of the EU ETS and are deemed exposed to carbon, investment and employment leakage.
We urge Members of the European Parliament to acknowledge the importance of our sectors for the EU economy, in particular for European jobs, and all their economic value chains by rejecting any “tiered approach” to free allocation and voting against it.
We strongly oppose any “tiered approach1” and continue to advocate for full (100%) free allocation up to emissions efficiency benchmark levels for all sectors.
We maintain that:
- The tiered approach would reserve free allowances for some sectors at the expense of others. It would go against the principle set in the October European Council Conclusions that best performing companies in the ETS carbon leakage sectors should not bear additional carbon costs. Fairness should be a key principle of policy making. Jobs in one sector are neither more nor less important than those in other sectors.
- The proposed tiering has no economic logic. It is based on flawed assumptions that the European industrial sectors could pass on costs without losing market shares and lacks any cost comparison between a given European and a non-European sector.
- Nor does it have proven environmental logic. It would not deliver decarbonisation through investment and innovation but rather drag those investments outside Europe. In fact, the tiered approach punishes a sector investing in carbon emission reductions by giving a lower protection against the risk of carbon leakage as a direct consequence of these investments.
- Moreover, it could well prove to have been unnecessary to prevent a Cross Sectoral Correction factor (CSCF). Many analysts’ reports, including the Commission’s Impact Assessment, predict that there will be sufficient allowances available to ensure full free allocation at the benchmark levels and there is no grounds for referring to discriminatory instruments.
Our industries have made several alternative proposals to tiering, which include a lower auctioning share (52% instead of 57%), the application of a dynamic allocation and a fully flexible reserve for growth that would deliver full and effective carbon leakage protection without the need for arbitrary discrimination.
In conclusion, we ask you to create a framework that gives all sectors an equal opportunity to thrive in Europe and not to pick and choose which sectors stay in Europe.
1. Cefic - European Chemical Industry Council
2. Cembureau – European Cement Association
3. Cepi – Confederation of European Paper Industries
4. Cerame-Unie - European Ceramic Industry Association
5. Epmf – European Precious Metals Federation
6. European Copper Institute
7. Esga – European Special Glass Association
8. Esta – European Steel Tube Association
9. EuroAlliages - Association of European ferro-Alloy producers
10. Eurogypsum - Gypsum Industry
11. Eula – European Lime Association
12. Exca - European Expanded Clay Association
13. Feve – The European Container Glass Association
14. Association of the world's Primary Nickel Producers
15. International Zinc Association
1 In fact, there is no single approach on tiering, as there is no sound basis to build a tiered approach in the EU ETS.