Cefic position on the ETS reform
On July 15, 2015 the European Commission presented its proposals for reforming the EU Emissions Trading System, for the period 2021-30. Cefic welcomes the reform which gives the possibility for stakeholders to share their views. At present Cefic remains cautious that the proposal as it stands would be able to deliver the necessary incentives for companies to invest and grow in Europe.
Cefic is working actively with the Alliance of Energy Intensive Industries – which represents over 30 000 European companies and 4 million jobs – towards a fair and efficient reformed ETS enabling the most efficient companies to grow in Europe. We support in particular dynamic free allocation principles, improved carbon leakage prevention, and harmonised indirect compensation mechanisms.
Download Commission study on cost pass-through in EU ETS lacks strong econometric evidence
Existing ETS has perverse collateral effects
Proposal: using the reserve to spur growth
Result : a virtuous circle
Adoption of the Market Stability Reserve
On 8 July 2015, the European Parliament adopted the regulation setting up a Market Stability Reserve. Taken in isolation, this new instrument will not provide the fundamental ETS rethink Cefic and the Alliance of Energy Intensive Industries believe is necessary.
Cefic has proposed using the MSR as a reserve for industrial growth. Under our proposal, undertakings that grow would receive allowances from the reserve to cover increased production at benchmark levels. Undertakings that reduce production would surrender the resulting surplus allowances to the reserve.
ETS System: The Bigger Picture
The European chemical industry supports the fight against climate change and the Commission’s ambition to transform the EU into a competitive low carbon economy. Our industry will play an instrumental role in delivering the technologies and solutions to reach that goal.
The EU ETS is a key instrument in the implementation of this common ambition. At the same time, it represents an important challenge for the European chemical industry. We are an energy user. Significant sectors of our industry – petrochemicals, ammonia, fertilisers, chlorine, etc – are energy- intensive. Just as the other energy-intensive industries – such as glass, cement, paper, metal or lime – we compete on price in global commodity markets.
The ETS has a significant impact on the competitiveness of energy-intensive industries, due to EU-specific direct costs (purchase of ETS allowances) and indirect costs (CO² as element of electricity price). Today, energy prices in the EU are higher than in other industrialised regions relevant for international competition. Unlike the power sector, energy-intensive industries cannot pass through their carbon costs to consumers without losing market share to their non-EU competitors. Companies that already meet the highest standards cannot do any more. Higher carbon costs will inevitably erode margins and hinder the industry’s ability to provide a sufficient return on investments in the long term. This would make non EU-countries a more attractive place to invest and impact adversely on jobs and growth prospects in the EU.
For the European industry to remain competitive, it is therefore important that market-based mechanisms like the ETS do not create unilateral financial burdens that risk directing resources away from innovation and investments.