While delegates from over 190 nations meet in Bali to set a negotiating framework for a post-2012 global regime to reduce CO2 emissions, Europe’s energy intensive industries have expressed concerns about how they will fare in a new world order with a potentially high carbon price tag.
Tightening the carbon belt
A November report by the think tank Bruegel argues that even if other nations level the playing field by applying a carbon trading mechanism similar to the EU ETS, Europe’s global competitiveness would likely suffer in a ‘carbon competitive’ world since the carbon-intensity of EU exports is higher than those of China, the US and other exporters.
The Commission appears to be aware of the concerns of Europe’s industry, which has stepped up warnings that a tough carbon market might force some industries to re-locate their activities outside EU borders.
“It would be neither good environmental policy nor economically viable if energy-intensive industries were to leave Europe and emit emissions, perhaps even higher ones, outside Europe,” Commission President José Manuel Barroso told EURACTIV in a recent interview.
“We are currently studying different options to address these issues, such as continued free allocation of allowances [under EU ETS], preferably on the basis of technological energy-efficiency benchmarks, international sectoral agreements and including importers of energy-intensive products – and excluding exporters – in the EU emissions trading scheme”, he added.
Towards a two-track carbon market?
Creating international sectoral agreements, as mentioned by Barroso, would allow energy intensive industries to operate under a separate carbon regime based on emissions reduction targets agreed by the industries, effectively sheltering the sector from a severe increase in operating costs related to clean technology upgrades or the purchasing of emissions credits from projects in developing countries.
The idea has been backed by EU Industry Commissioner Günter Verheugen and the EU’s High Level Group (HLG) on Competitiveness, Energy and Environment (see positions section).
Within the EU itself, a parallel system may be taking shape, according to the WWF. The Commission is currently considering whether to add a ’28th state’ to EU ETS, whereby a certain percentage of the overall emissions credits would be allocated to energy intensive industries, while the remaining credits would be spread among other industries.