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29/08/2016

EU allows aid to limit CO2 cost for big power users

Climate & Environment

EU allows aid to limit CO2 cost for big power users

Smelting-aluminium-at-the-001.jpg

European Union nations will be able to compensate some big energy users, including steel and aluminium producers, for extra costs resulting from changes to the EU Emissions Trading System (ETS) beginning next year, the Commission confirmed yesterday (22 May).

A draft last month had already shown EU member states from 2013 would be able to shield big industry, to try to prevent so-called carbon leakage, which happens when rising costs drive business out of Europe.

"If production shifts from the EU to third countries with less environmental regulation, this could undermine our objective of a global reduction of greenhouse gas emissions," Competition Commissioner Joaquín Almunia said in a statement.

From next year, the EU's ETS expands to include more sectors and fewer permits will be handed out for free, meaning polluters will have to pay for them through auctions and power costs could rise.

Sectors judged eligible for compensation to make up for some of the expected extra energy cost, include producers of aluminium, copper, fertilisers, steel, paper, cotton, chemicals and some plastics.

The aluminium sector and other big users have lobbied hard, saying the expected increase to their power costs when the ETS enters its next phase could be crippling.

Positions

Oliver Bell, the president of Eurometaux, the European Association of Metals, said: "’We are disappointed that the EU Commission is not using this opportunity to halt the de-industrialization of Europe, prevent job-losses and thereby also reduce EU’s increased dependency on imports of strategic metals. Once closed, these smelters will never come back to Europe.’’ 

Their concerns were echoed by the European Aluminium Association who issued a statement saying: "The new guidelines published today... will fail in their objective to prevent carbon leakage as they will not provide the necessary support for Europe’s primary aluminium industry. The European aluminium industry urges the European Commission to encourage Member States to employ additional means to secure the industry competitiveness and prevent carbon leakage."

European Commission Vice-President in charge of competition policy, Joaquín Almunia, said: "If production shifts from the EU to third countries with less environmental regulation , this could undermine our objective of a global reduction of greenhouse gas emissions. There may be such a risk in some sectors, given the expected impact of the ETS on electricity costs as from 2013. The rules adopted today allow Member States to address this issue while maintaining incentives to decarbonise production and consumption and minimising any distortions of competition."

Background

The European Commission has adopted a framework under which member states may compensate some electro-intensive users, such as steel and aluminium producers, for part of the higher electricity costs expected to result from a change to the EU Emissions Trading System (ETS) when its third phase begins in 2013.

The EU says that its new rules have been designed to ensure that national support measures preserve the objective of decarbonising the European economy and maintaining a level playing field among competitors in the internal market. The sectors deemed eligible for compensation include producers of aluminium, copper, fertilisers, steel, paper, cotton, chemicals and some plastics.

Further Reading