VCI on ETS reform: threat of considerable extra burden

Losing sight of competitiveness

From VCI’s viewpoint, the EU Commission proposals for a revision of the Emission Trading System are not well-balanced as regards industry policy. They run counter to the position of the European Council which holds that there should be no heavier burdens through ETS for the most efficient industrial installations in the future. Moreover, under the currently proposed criteria for the carbon leakage list, several chemical sectors would barely receive free allowances any more. By contrast, VCI welcomes that the Commission maintains its plans to compensate industry for higher electricity prices.

The EU Commission proposal on the revision of the Emission Trading Scheme (ETS) considerably increases the financial burden on energy-intensive industries. According to Utz Tillmann (director-general of the German chemical industry association VCI) the draft for the revision lacks suitable measures for securing the international competitiveness of key sectors like chemistry.

Tillmann: “In 2014 the European Council decided that the most efficient industrial installations should not be burdened any heavier by ETS in the future. With its draft the Commission entirely loses sight of that position. Instead of attaching more importance to competitiveness, the Commission is planning to put even more pressure on industry.” The VCI cannot understand this stance – especially in view of the World Climate Summit in Paris in late 2015. The VCI’s director-general finds it unlikely that the summit will bring a global climate protection agreement with the same framework conditions everywhere.

Tillmann emphasizes that the ETS revision is about many technical details. But together with the already adopted higher climate targets of the EU and the Market Stability Reserve (MSR), those various technical aspects are adding up to much higher costs for individual industrial sectors and installations. From the chemical industry’s viewpoint, it is adequate for the most efficient installations to continue receiving sufficient amounts of free greenhouse gas allowances also in the future, in order to prevent extra costs. Tillmann is calling for free allocation to be based on realistic benchmarks and the most recent production volumes. He thinks that the draft does not come up to such core requirements for a well-balanced industry policy concept.

Tillmann is also critical of the planned tighter thresholds for the inclusion of industrial sectors in the so-called carbon leakage list. Only the sectors named in the list have a chance to obtain high shares of free allowances. Tillmann: “According to the new rules, several chemical sectors would be removed from the list and would barely receive any free allowances any more – even though they depend on them in international competition. We are asking the Commission for corrections in this respect.”

The Commission maintains the plans for industry getting compensation for higher electricity prices due to ETS. Tillmann welcomes this, because for the German chemical industry there is the threat of extra costs of 2.2 billion euros annually for purchased electricity alone. Tillmann: “For electricity price compensation to be effective, it should benefit more sectors and full compensation should be granted for electricity price increases. Under the existing rules, compensation would be paid for less than one third of the extra costs.”

The VCI represents the politico-economic interests of over 1,650 German chemical companies and German subsidiaries of foreign businesses. For this purpose, the VCI is in contact with politicians, public authorities, other industries, science and media.The VCI stands for over 90 percent of the chemical industry in Germany. In 2014 the German chemical industry realised sales of more than 190 billion euros and employed 444,800 staff.

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Sebastian Kreth