‘Low carbon leakage’ begins as EU prepares to junk efficiency goal

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EXCLUSIVE / Fears of a relocation of Europe's clean energy industry abroad – low carbon leakage – have been fanned with news of a factory closure by a German insulation company that has a billion-dollar annual turnover.

In a letter to the EU Commission president, José Manuel Barroso, seen by EURACTIV, Tony Robson, the CEO of Knauf Insulation blamed a slackening of Europe’s commitment to energy efficiency goals for his firm’s decision.

“If words were action in the field of energy efficiency, then I would be opening new factories in Europe,” Robson’s letter reads, “but as they are not we have just closed a factory in Italy and are planning to open three new plants in the US, Asia and Turkey.”

The company has “no plans to build any additional plants” in Europe, according to the letter, which is dated 9 January.

Robson said that he saw a future in which “there is no binding energy efficiency target and therefore our investors simply won't believe that the statements made about the potential will actually be realised.”

On 22 January, the EU is expected to deliver a White Paper for 2030 merely advocating a binding 35%-40% greenhouse gas emissions cut and indicative 24%-27% renewable energy goal.

No consideration of new energy savings targets will be given until after until a review of the Energy Efficiency Directive in June, despite the warm words which Commissioners and heads of state routinely shower upon its potential for cost-effective CO2 reductions.

While Robson describes himself as a believer in the market, he points out that “energy efficiency does not happen by itself,” citing evidence that investors were currently not even satisfied with returns within a three-month period.

“The market is failing and intervention is necessary,” his letter says.

Widely-shared concerns

EURACTIV has learned that several companies working in the energy efficiency field share Knauf Insulation’s concerns and a handful have sent similar, albeit less-outspoken missives to EU commissioners.

On 14 January, Gene Murtagh, CEO of the Irish insulation company, Kingspan, wrote to Máire Geoghegan Quinn, the research, innovation and science commissioner, to express support for “a mandatory and binding target for energy savings” by 2030.

Without it, “we risk the leakage of low carbon jobs to those rapidly developing and urbanizing parts of the world that are quicker to seize the opportunities in front of them,” reads Murtagh’s letter, which EURACTIV has seen.

“It is a simple fact: companies build factories and invest in R&D where there is demand,” Murtagh added.

Commissioner Quinn also received a letter from Manlio Valdes, the VP and president of Ingersoll Rand, on the same day, warning that their company only remained competitive when there was a successful uptake of its energy efficient technologies.

“Current EU legislation has not been enough to act as a catalyst to maximize the deployment of available energy efficient technologies and services,” warns Valdes’ letter, which also calls for a binding target.  

Green-collar job losses

A fear of green-collar job losses if the Commission announces conservative clean energy targets is widespread among Europe's efficiency industry, even if few company spokesmen will go public.

“There is a general worry that not enough attention is being paid to energy efficiency but in terms of plant closures I cannot really comment,” one said.

Another cautioned that they were not closing down manufacturing plants yet but that their growth was "driven by energy efficiency mandates".

However, trades-unions professed scepticism about any potential leakage threat. “We need incentives to support the value chain and support providing manufacturing industry with incentives to remain in Europe but I am not sure that clean energy leakage is something serious,” Benjamin Dennis a sustainability advisor to the European Trades Union Confederation told EURACTIV.

“I think it is more of a communications strategy,” he said.

Low-carbon leakage lingo

The discourse on ‘low carbon leakage' developed in response to a successful campaign by energy intensive industries, which argued that they were at risk of ‘carbon leakage’, because of EU climate laws.

In a comment piece published online last week, the climate commissioner, Connie Hedegaard, said that carbon leakage was “an important risk” but one that the EU had already addressed – generously so, according to one analysis.

“Maybe we should be a bit more concerned about the risk of low-carbon leakage,” Hedegaard said. “Without ambitious climate polices, Europe will fail to attract investments in rapidly innovating economic sectors and the high-quality jobs we so badly need.”

At the Warsaw UNFCCC negotiations in November, the British energy secretary Ed Davey also made statements about the dangers of low carbon leakage.

But the UK has put itself at the forefront of efforts that appear to have stifled any binding energy efficiency or renewable targets.

In a warning shot across the Commission’s boughs, a letter sent to Barroso, and several senior officials by 12 MEPs on 14 January drew attention to a much more ambitious proposal passed by Parliament last week.

“Please be aware there is a very huge majority in the European Parliament for a GHG (greenhouse gas reduction) target of at least 40%,” say the MEPs, who include Peter Liese (EPP), Matthias Groote (S&D), and Gerben Jan-Gerbrandy (ALDE).

The decision to make the 2020 energy efficiency target non-binding had been “a big mistake,” the MEPs said.

The Energy Efficiency Industrial Forum forwarded EURACTIV a letter to the EU executive in which several trade associations representing over €150 billion in the European economy, call for energy savings to be given a "leading role" in the upcoming 2030 clean energy package. "As representatives of industry, increasing competitiveness at a European and global scale, keeping energy bills under control, creating and maintaining local jobs, plus ensuring secure energy supplies are part of our core daily concerns," their letter says. "Energy efficiency is an enabler to all these. As businesses, we firmly believe that energy efficiency is core to making long-term climate objectives compatible with immediate, and equally urgent, economic and social concerns."

The triple objective on energy is part of the EU’s ‘Europe 2020 targets’ and is also known as the "20/20/20 targets”.

The three objectives for 20202 are: A 20% reduction in greenhouse gas emissions in the EU, compared to 1990 levels; Achieving a 20% share of the energy market  for renewable energy across the bloc; Making energy consumption across the EU 20% more efficient than it was in 2005 according to a PRIMES baseline projection model. This latter target is not binding.

The targets were endorsed by the European Council in 2007 and implemented through the EU’s 2009 climate and energy package and the 2012 energy efficiency directive.

  • 22 January 2014: EU climate package to be published
  • June 2014: Energy Efficiency Review due to consider progress towards meeting the 2020 goal.

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