EID: Market stability reserve in emission trading endangers competitiveness
Setback for investment in Europe
Energy-intensive industries in Germany (EID) are voicing clear criticism of today’s decision by the Environment Committee of the European Parliament: for introducing a market stability reserve for 2018 in European emission trading. As a consequence, the German EID sectors could be faced with extra costs of 4.6 billion euros per annum.
Press Release by the Energy-Intensive Industries in Germany (EID)
Energy-intensive industries in Germany (EID) are voicing clear criticism of today’s decision by the Environment Committee of the European Parliament: for introducing a market stability reserve (MSR) for 2018 in European emission trading. The amendments proposed by the Committee lead to a considerable tightening of the Commission proposal. From the viewpoint of the energy-intensive industries, the MSR is neither reconcilable with emission trading nor conducive to climate protection.
EID spokesman Utz Tillmann states: “The market stability reserve is a setback for the political acceptance of emission trading in Europe and for investments. The MSR is not what its name leads to suppose. This step makes a functioning market for allowances in Europe unpredictable and could cause high costs for energy-intensive companies, which are impacted the most.” As the MSR brings an increase in allowance prices and, consequently, also in electricity prices, the German EID sectors (construction materials, chemistry, glass, non-ferrous metals, paper and steel) could be faced with extra costs of 4.6 billion euros per annum, so Tillmann (director-general of the German Chemical Industry Association VCI). According to Tillmann, industry highlighted the cost problem in the discussion but this issue was not given enough attention. He thinks that the Environment Committee’s decision shows compromise but does not solve the cost problem.
EID spokesman Klaus Windhagen (director-general of the German Pulp and Paper Association/VDP) emphasises that the market stability reserve is unnecessary for climate protection. Windhagen: “The climate goals of the European Union are fully achieved without the MSR. Another market intervention is only meant to drive up allowance prices. We fear an even stronger trend among companies to invest outside Europe, due to the lack of reliability in the European energy and climate policy.” Windhagen sees such a trend already today.
The EID spokesmen are jointly calling upon the EU institutions to take appropriate measures in the further course of the legislative procedure, in order to counteract the negative effects of the MSR on jobs and investment in industry. They see the need for a review of the emission trading system to ensure the free allocation of allowances also in the future – with realistic benchmarks for free allocation to prevent additional costs for the most efficient installations. Furthermore, the EID spokesmen want an end of the correction factor. Otherwise the allocation of allowances would be reduced by 40 percent to 2030, with unacceptable cost burdens for the purchase of allowances.
From the EID’s perspective, it is also important that companies continue to receive full compensation for higher electricity prices. Otherwise, there is a growing risk of production relocations to sites outside the European Union. In its paper for the Energy Union the EU Commission sets the course for the future and urges the EU institutions to strengthen the competitiveness of energy-intensive industries. Tillmann: “One day before the Commission wants to present the Energy Union, the EP takes measures that put at risk our competitiveness. This simply makes no sense, and the Commission needs to respond to this.
Energy-Intensive Industries in Germany (EID) have around 830,000 staff, accounting for 14 percent of employment in the manufacturing sector. Every job in the energy-intensive production of basic materials secures about two jobs in other industries or in the service sector.