Free, but not easy: EU industry, lawmakers grapple over how to divvy up CO2 units

Published 19:39 on April 21, 2016  /  Last updated at 19:40 on April 21, 2016  /  EMEA, EU ETS  /  No Comments

Industry and lawmakers remain deeply at odds over how to divvy up a dwindling share of free carbon allowances after 2020, nine months after the European Commission published its proposal to revise ETS rules for the next trading phase.

Industry and lawmakers remain deeply at odds over how to divvy up a dwindling share of free carbon allowances after 2020, nine months after the European Commission published its proposal to revise ETS rules for the next trading phase.

The EU Parliament and the Council of member states need to agree on any changes for the bill to become law, in a process due to last another year at best, but both showed signs of fracture this week.

Last week, Frederick Federley, the MEP steering the process through the Parliament’s industry committee, said the EU should change the two-track allocation outlined by the Commission to a more tiered approach that aims to better target allowances to those sectors deemed more vulnerable to carbon leakage.

Following the input of other political groups, Federley said he aimed to complete a report on the bill by the middle of this week. But no sign of the report had emerged by Thursday amid rumours of resistance from MEPs.

Barbara Kappel, senior MEP co-ordinating the file for the tiny far-right ENF grouping, told an event organised by steel association Eurofer on Thursday that the one thing she would change would be to move away from a tiered approach.

Meanwhile, a separate proposal for four tiers from the UK and France came under fire from several industry associations including BusinessEurope and IFIEC this week, with IFIEC favouring the ‘dynamic allocation’ method being quietly pushed by Belgium and the Netherlands.

Slovakia, which will take over the rotating six-month Council presidency in July, vowed to make the bloc’s Energy Union effort a top priority and aims to get a general agreement on the ETS by the end of its reign, according to Alexander Micovcin, a Slovakian envoy in Brussels who spoke at the Eurofer event.

COMMISSION BROKERING

In an effort to make headway on the issue of free allocations, the Commission on Thursday convened a meeting of invited industry experts, NGOs, and analysts to discuss the proposal.

The session focused in particular on how likely the various proposals would be to trigger an across-the-board slashing of free EUA allocations via the Cross Sectoral Correction Factor (CSCF).  The measure is employed whenever the amount of free allocation for which companies have applied exceeds the overall number of permits available, and is utilised regardless of each sector’s deemed vulnerability to carbon leakage.

“In view of minimising the CSCF, it is hard to offer a guarantee but still possible to be making a good effort,” said Jos Delbeke, the Commission’s top climate official, who chaired the webstreamed meeting.

“Analysis shows the CSCF may not be needed or would be minimised under the Commission proposal,” he said, after hearing presentations from analysts at Thomson Reuters Point Carbon, I4CE, and ICIS Tschach Solutions.

The CSCF is almost universally hated by industry because it means even the best performing facilities face getting fewer free EUAs than they need to comply. But the Commission has warned that other approaches could be too complex and costly to administer.

During the meeting, Marco Mensink of chemical industry lobby CEFIC offered to share more of his companies’ data to help officials and analysts model the other approaches.

“We are in favour of taking on that work and will reflect how to come back,” said Delbeke, adding that the Commission would examine how it might use the data to examine more deeply the free allocation across various industrial sectors.

KEY READS

  • Our quick guide to the key elements of the commission’s post-2020 revision proposal.
  • Our analysis on why industries expect to face escalating costs from it.

By Ben Garside – ben@carbon-pulse.com

 

 

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