Speaking at the 2008 edition of the European Business Summit, representatives of leading European companies in the steel, chemical and oil sectors implored the Commission to provide them with more clarity regarding the climate regime they would be facing after 2013.
The main doubts they want cleared up surround:
- A concrete definition of what the EU plans to categorise as an "energy-intensive industry", and;
- which support schemes will be put in place to help sectors determined to be "at significant risk of carbon leakage," for example in cases of relocation to third countries with less stringent climate protection laws.
The Commission has said it will not decide on either of these matters until 2010 or 2011, when the outcome of international negotiations on a post-Kyoto climate regime becomes clearer.
- Investments on hold
Jean-Pierre Clamadieu, CEO of the French chemicals manufacturer Rhodia, pointed out that French cement maker Lafarge had recently been forced to put investment in its European plants on hold due to a lack of visibility regarding the cost of CO2 allowances after 2013. Clamadieu said it was likely his company and others would start facing similar issues: "It is important we get visibility as quickly as possible. If we don't, then I think there will be lot of investment project delay or investment which will move to different regions of the world."
Michel Wurth, a member of the world's largest steelmaker ArcelorMittal's management board, agreed that companies were "in the fog". He said that while his company had not yet had to postpone any major investments, it was in doubt regarding developments after 2012. He pointed to his company's decision to keep its installation in the Belgian town of Liège open until 2012, where a decision on whether to keep it running after that has not yet been taken. "This is a good example of the limits of the present system," he said.
The director general of the Commission's trade department David O'Sullivan, however, defended the EU executive's proposal to delay any decisions on special treatment for energy-intensive companies, saying: "I think it is very wise not do go to global negotiations already wielding the big stick. We need developing countries to buy in […] and making threats is not the answer."
He nevertheless conceded that "companies are very good at responding to clear public signals" and that the EU should ensure that it provides a "reasonably stable environment" for them.
- Carbon taxes – a second-best option
"Border adjustment measures will always be a second-best option," stressed O'Sullivan, to the agreement of business representatives, who stressed that a global solution, even if assymetrical, would be preferred.
"If Europe goes it alone, the problem will be solved by exporting jobs," said Wurth, highlighting the need for either free allocation or cross-border taxes – "which are not our first choice," he stressed.
"We cannot sustain a huge competitive gap. We need to put in place a simple mechanism that allows, maybe not a level playing field, but one that is not too unbalanced," said Clamadieu.
- Sectoral deals better for business?
Wurth underlined that sectoral agreements could provide a solution. "The solution is not a 'go-it alone' one, but a sectoral one," he insisted. "If we really want to be ambitious, let's make a sectoral agreement so that we can work together to find the best possible technologies and then find ways to finance it," he said.
In the steel sector, he noted, this would require only the EU and the nine other large steel-producing countries, including the US, China, India, Russia and Brazil, to enter into the agreement – covering roughly 90% of all trade.
He believes such pacts should be based on a benchmarking of emissions performance, where the best performers are rewarded, notably with additional allowances free of charge, and the worst performers are penalised. "This would create a virtuous circle," he said.
- More research needed
Companies also called for the EU to step up research funding for innovative, energy-efficient technologies and products.
As Shell Renewables vice-president and member of the World Business Council for Sustainable Development (WBCSD) Graeme Sweeney pointed out, technologies like carbon capture and storage are "a key part of the solution" but today, they remain very expensive. "Normally, we would wait, but we don't have time," he said, stressing that public-private partnerships were needed to validate the technology in the next five years.
"We want the Commission to make a major announcement that it is going to invest more in research to help energy-intensive industries develop innovative solutions in terms of efficiency. There is huge potential," concluded Wurth.
