Global Economics

CO2 Leeway from EU for Heavy Industry


The EU offers safeguards to industry if a global climate change deal falls through and the bloc must implement new pollution rules

Energy intensive industries have won some concessions from the European Commission when it comes to taking part in future legislation to reduce greenhouse gas emissions in Europe.

Following an EU summit in Brussels on Thursday and Friday (13-14 March) and the intervention of several member states -- including economic powerhouse Germany -- Brussels has offered safeguards to energy intensive industries such as steel and cement factories on its proposal to force them to buy rights to emit carbon dioxide by auction.

If next year's international negotiations on a new climate change deal fail, then certain measures will kick into place, with industry in these sectors worried that they will lose their competitive advantage if forced to buy pollution rights when companies outside the EU continue to benefit from laxer environment rules.

Trade unions have also warned of severe job losses if European companies choose to relocate to avoid the EU's strict pollution rules.

"I am particularly happy with the solution for energy-intensive industry and carbon leakage," the European Commission President Jose Manuel Barroso said after 27 EU leaders had wrapped up their traditional spring gathering.

The summit conclusions suggest that "appropriate measures" will be taken "if international negotiations fail." At the end of next year, governments will try and agree a new climate change agreement for after 2012, when the current Kyoto set-up runs out.

Energy intensive industries in Europe are to be offered two assurances should there fail to be a global agreement. They may get free pollution permits -- instead of having to buy them by auction -- linked to technological benchmarks, while the EU could also make foreign companies take part in the emissions trading system (ETS).

"This is a very credible response" to some EU states' and industries' fears, Mr. Barroso said of the compromise.

However, the commission has refused to list concrete industries, which could possibly be subject to the safeguards. It argues it should reflect the outcome of international talks on climate change in December 2009, as it may result in a sectoral deal.

Energy intensive industry has been up in arms since Brussels in January proposed overhauling the ETS, seen as key to achieving the bloc's goal of reducing CO2 emissions by 20 percent by 2020.

Under the new-look system, EU member states will no longer be able to grant pollution permits to their companies. Instead, the national allocation plans would be replaced by auction.

EU leaders agreed, however, that "an international agreement remains the best way of addressing this issue" -- something that should give the 27-nation bloc a better negotiating position at the United Nations climate change conference in Copenhagen in December 2009.

"The current system based on national caps of emissions did not provide enough guarantees" for achieving the overall 2020 goal, said Slovenian Prime Minister Janez Jansa, whose country currently holds the rotating presidency of the EU.

But he also mentioned concern over the possible relocation of EU companies to countries beyond the EU that could cause serious both social problems at home and a global rise in greenhouse gas emissions.

"This is a dual concern, so we need to pay specific attention to that," Mr. Jansa said.

"An international agreement must provide equal conditions for all. Our industry, especially energy-intensive industry expects - and they are right in doing - that we will have a suitable solution."

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