The European Parliament’s environment committee on Wednesday (24 September) narrowly upheld plans to give billions of euros worth of carbon allowances to heavy industries for free, in order to help them compete in global markets.
The 67-strong cross-party parliamentary committee voted by 34 to 30, with three abstentions, to uphold the proposal.
It was supported by centre-right groups, and opposed by Greens and Liberal members, who said it would waste billions of euros of public funds on needless handouts to big business.
“[A rejection] would be sending a wrong signal to companies,” said Peter Liese, a German member of the centre-right European Peoples Party (EPP), told the committee, sitting in Brussels.
A rejection could have scaled down the level of support by about €5 billion. The cement industry including companies such as Holcim and Lafarge could have been denied giveaways worth around €2 billion at current prices.
In May, the European Commission proposed that the vast majority of industrial sectors should get most of their allowances for free in 2015-2019 to help meet their obligations under the EU Emissions Trading System (ETS).
The ETS regulates around half of Europe’s output of heat-trapping gases by forcing over 12,000 power plants, factories and airlines to surrender an allowance for every tonne they emit.
The so-called carbon leakage list of companies entitled to free permits was formed to guard against the relocation of EU industries to regions such as the Middle East with less stringent emission limits.
It was approved by member state officials in July, but Dutch Green MEP Bas Eickhout objected after it emerged the executive had ignored recommendations in its own analysis.
“The Commission’s own research has indicated that there is no real risk of these sectors relocating, which is the ostensible reason for allocating them emissions permits for free,” Eickhout said in a statement after the vote.
The pre-2015 carbon leakage list assumed industry would face competitive risks when allowance prices rose above €30 a tonne, but current levels are near €6.
The Commission’s unpublished impact assessment, seen by Reuters, recommended lowering this assumption to €16.50, enough to take cement and five other sectors off the list.
Gerben-Jan Gerbrandy, leader of the committee’s Liberals, voted against the proposal, saying it was based on “political deal-making” rather than scientific evidence.
But Commission official Hans Bergmann told the committee the executive was justified in proposing to keep the €30 assumption because it was separately proposing reforms that would boost carbon prices.
Market analysts expect prices to climb to around €10 for the rest of this decade, even with the reforms.
This discrepancy angered environmental campaigners, who want to force more companies to pay for their emissions and encourage them to invest in carbon-cutting technology.
The vote represents a victory for industry association BusinessEurope, which had urged MEPs to uphold the proposal or risk “immediate and serious consequences for industrial investments in Europe”.